Australian Securities and Investments Commission v Bettles

[2023] FCA 975

FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Bettles [2023] FCA 975

File number:

QUD 693 of 2019

Judgment of:

MARKOVIC J

Date of judgment:

18 August 2023

Catchwords:

CORPORATIONS – application under s 45-1 of the Insolvency Practice Schedule (Corporations) (IPS), Sch 2 to the Corporations Act 2001 (Cth) – application for cancellation of defendant’s registration as a registered liquidator – whether defendant breached duties in ss 180(1), 181(1) and 182(1) of the Corporations Act – whether defendant breached common law duties – accessorial liability – whether a person involved in a contravention of s 180 of the Corporations Act contravenes that Act – whether defendant was involved in contraventions of s 181(1) and s 182(1) of the Corporations Act – where primary contravenor is not a party to the proceeding – where the defendant relies on s 545(1) of the Corporations Act in relation to alleged breaches of duties as liquidator – whether defendant breached provisions of the Australian Restructuring Insolvency & Turnaround Association Code of Professional Practice– whether plaintiff has established matters to be taken into account for the purposes of s 45-1 of the IPS – whether defendant failed to discharge obligations as liquidator to obtain relevant books and records in relation to reports filed under s 533 of the Corporations Act – application dismissed

Legislation:

Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) s 18

Australian Securities and Investments Commission Act 2001 (Cth) ss 12DA(1), 12DB(1)(i) and 13

Corporations Act 2001 (Cth) ss 79, 180, 181, 182, 422, 438, 533, 536 (repealed) 1041H, 1308(2), 1317E

Freedom of Information Act 1982 (Cth)

Insolvency Practice Schedule (Corporations), being Sch 2 to the Corporations Act 2001 (Cth) s 1 and s 45-1 subs (4)(a), (b), (d) and (e)

National Consumer Credit Protection Act 2009 (Cth) s 29 and s 30

Personal Property Securities Act 2009 (Cth)

Taxation Administration Act 1953 (Cth) Sch 1 s 449-89(1D)

Trade Practices Act 1974 (Cth)

Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) s 116

Estate Agents Act 1980 (Vic) s 12(1)

Land Acquisition (Just Terms Compensation) Act 1991 (NSW) s 55

Cases cited:

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181

Australian Securities and Investments Commission v Big Star Energy Ltd (No 3) (2020) 389 ALR 17; [2020] FCA 1442

Australian Securities and Investments Commission v Cassimatis (No 8) (2016) 336 ALR 209; [2016] FCA 1023

Australian Securities and Investments Commission v Dover Financial Advisers Pty Ltd (No 2) (2019) 140 ACSR 635; [2019] FCA 2151

Australian Securities and Investments Commission v Drake (No 2) (2016) 340 ALR 75; [2016] FCA 1552

Australian Securities and Investments Commission v Flugge (2016) 342 ALR 1; [2016] VSC 779

Australian Securities and Investments Commission v Maxwell (2006) 59 ACSR 373; [2006] NSWSC 1052

Australian Securities and Investments Commission v Mitchell (No 2) (2020) 382 ALR 425; [2020] FCA 1098

Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229

Australian Securities and Investments Commission v Wily (2019) 137 ACSR 1; [2019] NSWSC 521

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304

Capricornia Credit Union Ltd v Australian Securities and Investments Commission (2007) 159 FCR 69

Chew v R (1991) 4 WAR 21

Commissioner of Taxation v Iannuzzi (No 2) (2019) 140 ACSR 497; [2019] FCA 1818

Coshott v Prentice (2014) 221 FCR 450

Doyle v Australian Securities and Investments Commission (2005) 227 CLR 18

DTM Constructions Pty Ltd (t/as QA Developments) v Poole (2017) 123 ACSR 171; [2017] QSC 210

English v Vantage Holdings Group Pty Ltd [2021] WASCA 47

Giorgianni v The Queen (1985) 156 CLR 473

Hakea Holdings Pty Ltd v Neon Underwriting Limited for and on behalf of the Underwriting Members of Lloyds Syndicate 2468 (2023) 408 ALR 28; [2023] FCAFC 34

Hanwood Pastoral Co Pty Limited v Kelly (No 2) [2022] FCA 850

Hausmann v Smith (2006) 24 ACLC 688; [2006] NSWSC 682

In the matter of Vault Market Pty Ltd [2014] NSWSC 1641

Ireland v WG Riverview Pty Ltd (2019) 101 NSWLR 658

Jahani, in the matter of Ralan Group Pty Ltd (in liq) (2022) 159 ACSR 222; [2022] FCA 107

Macks v Viscariello (2017) 130 SASR 1

Matheson Engineers Pty Ltd v El Raghy (1992) 37 FCR 6

McMillan v Coolah Home Base (No 3) [2020] NSWSC 1325

Murdaca v Australian Securities and Investments Commission (2009) 178 FCR 119

Pace v Antlers Pty Ltd (in Liquidation) (1998) 80 FCR 485

Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789

Seaman v Silvia [2018] FCA 97

Termite Resources NL (in liq) v Meadows, Re Termite Resources NL (in liq) (No 2) (2019) 370 ALR 191; [2019] FCA 354

United Petroleum Australia Pty Ltd v Herbert Smith Freehills (2018) 128 ACSR 324; [2018] VSC 347

Vrisakis v Australian Securities Commission (1993) 9 WAR 395

Wyong Shire Council v Shirt (1980) 146 CLR 40

Yorke v Lucas (1985) 158 CLR 661

Australian Restructuring Insolvency & Turnaround Association Code of Professional Practice

Keay’s Insolvency (11^th ed, Thomson Reuters, 2022) 

Division:

General Division

Registry:

Queensland

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

888

Date of hearing:

6 – 9 June 2022; 13 – 16 June 2022; 4 – 5 August 2022

Counsel for the Plaintiff:

Ms C Heyworth-Smith KC, Mr S Seefeld and Ms K Slack

Solicitor for the Plaintiff:

Colin Biggers & Paisley Pty Ltd

Counsel for the Defendant:

Mr PP McQuade KC, Mr AJH O’Brien and Ms J Marr

Solicitor for the Defendant:

Norton Rose Fulbright Australia

ORDERS

QUD 693 of 2019

BETWEEN:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Plaintiff

AND:

JASON WALTER BETTLES

Defendant

ORDER MADE BY:	MARKOVIC J
DATE OF ORDER:	18 AUGUST 2023

THE COURT ORDERS THAT:

1.The proceeding be dismissed.

2.The plaintiff pay the defendant’s costs of the proceeding. 

3.If either party wishes to apply to vary Order 2 above, on or before 1 September 2023 that party should file and serve submissions, not exceeding five pages in length, setting out the orders sought and the reasons for seeking those orders. 

4.If submissions are filed by a party pursuant to Order 3 above then the other party may file submissions in response, not exceeding five pages in length, such submissions to be filed on or before 15 September 2023.

5.Unless a party requests an oral hearing, any application made to vary Order 2 above will be dealt with on the papers.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TABLE OF CONTENTS

1       ASIC’s pleaded case	[6]
2       Facts	[19]
2.1      Witnesses	[19]
2.2      ASIC commences an investigation	[24]
2.3      Mr Bettles – background	[25]
2.4      Worrells’ file management system	[28]
2.5      The MA Group	[35]
2.6      Mr MacVicar	[41]
2.7      The ATO serves statutory demands	[46]
2.8      Ramsden Lawyers	[48]
2.9      Pre-appointment meetings	[52]
2.9.1        8 July 2016 Meeting	[52]
2.9.2        14 July 2016 Email	[61]
2.9.3        14 July 2016 Meeting	[62]
2.9.4        16 July 2016 Meeting	[65]
2.9.5        Mr Bettles’ general recollections of discussions at the pre-appointment meetings	[67]
2.10     The WMS PowerPoint	[69]
2.11     Mr Bettles’ knowledge	[86]
2.11.1      Mr Bettles’ knowledge as at 8 July 2016 including the strategy	[86]
2.11.2      Mr Bettles’ knowledge as at 14 July 2016	[91]
2.11.3      Mr Bettles’ knowledge as at 16 July 2016	[95]
2.12     The Benchmark Group of companies	[99]
2.13     Mr Bettles’ appointment as external administrator of companies in the MA Group	[104]
2.14     Security interests granted to Ramsden Lawyers, WMS, entities associated with Mr Domingo and Crest Accounting	[114]
2.15     Iridium Holdings	[125]
2.16     The MA Group as a tax consolidated group	[129]
2.17     Labour hire companies in the MA Group	[157]
2.18     Progress Meetings	[161]
2.19     Management deeds	[164]
2.20     Provincial Property	[167]
2.20.1      Proposed management deed	[171]
2.20.2      Operation of Provincial Property’s bank accounts	[193]
2.20.3      Mr Marlborough’s involvement	[201]
2.20.4      Valuation of the Rent Roll	[204]
2.20.5      The requirement to hold a real estate agent’s licence	[208]
2.20.5.1          Victoria	[210]
2.20.5.2          New South Wales	[217]
2.20.5.3          Queensland	[220]
2.20.6      Marketing and sale of the Rent Roll	[222]
2.20.7      Disclaimer of the Provincial Property property management agreements	[227]
2.21     Management rights held by Airlie Beach	[230]
2.22     SS Residential	[249]
2.22.1      The SS Residential Deed	[254]
2.22.2      Payment of the Surrender Fee	[260]
2.22.3      The MacVicar Payment	[261]
2.22.4      The winding up of SS Residential	[282]
2.23     MM Prime	[289]
2.24     Elderton Transaction	[319]
2.25     Capricorn Securities and Iridium Financial Planning	[330]
2.25.1      Iridium Financial Planning and Capricorn Securities Management Deeds	[343]
2.25.2      Liaison with ASIC	[350]
2.25.3      Payments to Mr Marlborough	[365]
2.25.4      Sale of the Client Book	[367]
2.25.5      Winding up of Capricorn Securities and Iridium Financial Planning	[399]
2.26     Books and records of the companies in the MA Group and the s 533 reports	[402]
2.26.1      Books and records	[402]
2.26.1.1          MYOB files and other financial information	[402]
2.26.1.2          Hard copy books and records	[405]
2.26.1.3          Electronic Material	[410]
2.26.2      ASIC serves a notice for production of books	[411]
2.26.3      Section 533 reports	[414]
3       Statutory framework and legal principles	[422]
3.1      The IPS	[422]
3.2      Common law and statutory duties	[428]
3.2.1 Section 180(1) of the Corporations Act	[439]
3.2.2 Section 181(1) of the Corporations Act	[440]
3.2.3 Section 182(1) of the Corporations Act	[442]
3.2.4        Accessorial liability – “involved in”	[443]
3.3 Section 545 of the Corporations Act	[449]
3.4      The ARITA Code of Professional Practice for Insolvency Practitioners	[453]
4       Consideration	[457]
5       ASIC’s implementation case	[459]
5.1      The MacVicar Deed and the MacVicar Payment (9.5 FASOC)	[460]
5.1.1 Did Mr Bettles breach his duty owed to Iridium Holdings under s 180 of the Corporations Act and fail to meet Liquidator’s Duty No. 1 and Liquidator’s Duty No. 2?	[461]
5.1.2        Did Mr Bettles act contrary to the ARITA Code of Conduct?	[474]
5.1.3 Was Mr Bettles involved in Mr Marlborough’s contravention of s 180 of the Corporations Act?	[487]
5.1.3.1            Is Mr Marlborough a necessary party?	[492]
5.1.3.2 Involvement in a breach of s 180 of the Corporations Act?	[495]
5.2      Entry into the Management Deeds (9.6-9.15 FASOC)	[509]
5.2.1        The pleaded case	[514]
5.2.2        Absence of Management Services and redirection of income streams	[524]
5.2.2.1            Were management services provided by the Benchmark Group?	[525]
5.2.2.2            Redirection of income streams	[539]
5.2.3        Did Mr Marlborough control the Benchmark Group	[545]
5.2.4 Did Mr Marlborough breach ss 180(1), 181(1) and/or 182(1) of the Corporations Act?	[553]
5.2.4.1            Section 180(1)	[554]
5.2.4.2            Section 181(1)	[555]
5.2.4.3            Section 182(1)	[565]
5.2.5 Mr Bettles’ alleged involvement in Mr Marlborough’s contraventions of s 181(1) and s 182(1) of the Corporations Act	[569]
5.2.6 Did Mr Bettles breach s 180(1) of the Corporations Act	[570]
5.3      The Elderton Transaction and MM Prime (9.16 FASOC)	[587]
5.3.1        Mr Bettles’ knowledge	[589]
5.3.2 Did Mr Bettles breach s 180(1) of the Corporations Act and/or Liquidator’s Duty No. 1, Liquidator’s Duty No. 2 and Liquidator’s Duty No. 4?	[598]
5.4      Sale of the Client Book (9.17 FASOC)	[606]
5.5      Provincial Property Rent Roll – disclaimer of onerous property (9.18 FASOC)	[655]
6       Other alleged breaches	[680]
6.1      Members’ voluntary windings up (10 FASOC)	[680]
6.2      Accepting appointments for SS Residential, Capricorn Securities and Iridium Financial Planning (11 FASOC)	[702]
6.3      DIRRIs, relevant relationships and indemnities (12 FASOC)	[710]
6.4      Failure to obtain books and records (13 FASOC)	[724]
7       The Bradford Marine Liquidation (Sch D to the FASOC)	[750]
7.1      Facts	[754]
7.1.1        Sale of Bradford Marine to Bradford Marine Services	[760]
7.1.2        The liquidation of Bradford Marine	[763]
7.1.2.1            Pre-appointment	[763]
7.1.2.2            Reports to Creditors	[773]
7.1.2.3            Investigations	[779]
7.1.2.4            Valuation of the Bradford Marine Business	[791]
7.1.2.5            Helicopter Aerial Surveys	[801]
7.1.3        The Bradford Marine Conduct	[813]
7.1.3.1            Offer by Mr Clark	[821]
7.1.3.2            Notification to Helicopter Aerial Surveys of conditional acceptance of offer	[832]
7.1.3.3            Engagement of CML	[839]
7.1.4        The Originating Application Conduct	[842]
7.2      Consideration	[848]
8       Relief sought by ASIC	[883]
9       Conclusion	[886]

REASONS FOR JUDGMENT

MARKOVIC J:

1. Liquidators perform a unique and important public function.  They act as protectors of the insolvent company, as asset recovery agents and protectors, as investigators, as inquisitors and as problem solvers: see Murray M and Harris J, Keay’s Insolvency (11^th ed, Thomson Reuters, 2022) at [1.180].  When a liquidator falls short of the standards expected of them both the public’s trust in the office of liquidator and the effective administration of the body of insolvency law are eroded.  In turn this affects the administration of justice: see Commissioner of Taxation v Iannuzzi (No 2) (2019) 140 ACSR 497; [2019] FCA 1818 at [204].

2. This proceeding brings into sharp focus the conduct of a liquidator.  In particular, the Australian Securities and Investments Commission (ASIC) seeks orders pursuant to s 45-1 of the Insolvency Practice Schedule (Corporations) (IPS) being Sch 2 to the Corporations Act 2001 (Cth) that Jason Walter Bettles’ registration as a liquidator be cancelled and that Mr Bettles be prohibited from reapplying for registration for a period to be fixed and as considered appropriate by the Court.

3. The conduct on which ASIC relies arises out of Mr Bettles’ appointment as administrator and/or liquidator to companies in the Members Alliance Group (MA Group), a group of more than 50 companies which operated principally from the Gold Coast, Queensland as well as his conduct as a liquidator of an unrelated company, Bradford Marine Pty Ltd (in liquidation). 

4. On 7 April 2022 orders were made for the question of remedies and sanction to be determined separately from the question of liability.  Accordingly, these reasons address only the latter.  However, given the conclusions I have reached it will not be necessary for me to consider questions of remedies and sanctions.  That is because, for the reasons that follow ASIC’s claim should be dismissed.

5. The events that led to this proceeding and to ASIC seeking the relief it did are set out below. 

   1.               ASIC’s pleaded case

6. ASIC relies on a further amended statement of claim filed on 10 June 2022 (FASOC).  Leave to amend was granted in the course of the trial in the circumstances described below.

7. The FASOC pleads a detailed case against Mr Bettles, a high level summary of which appears below.

8. As set out above, ASIC’s case relies on Mr Bettles’ conduct as a liquidator or voluntary administrator of companies in the MA Group as well as his conduct as a liquidator of Bradford Marine.  In summary ASIC contends that:

   (1)Mr Bettles knew of, enabled and facilitated the diversion of income producing assets and funds from certain companies in the MA Group, referred to as the MA Trading Companies (see [39] below), to the detriment of Iridium Holdings Pty Ltd (in liquidation), the sole shareholder of the MA Trading Companies (see [35] below) and other companies in the MA Group, and of creditors of those companies;

   (2)the alleged diversion of funds occurred through a strategy of which Mr Bettles was aware prior to his appointment as liquidator of Iridium Holdings and which was implemented after that appointment; and

   (3)Mr Bettles breached his duty in his capacity as liquidator of Bradford Marine by accepting an offer for the purchase of a chose in action and opposing a subsequent application for his removal as liquidator.

9. More particularly ASIC puts its case in the following way.

10. In its pleaded case, ASIC alleges that:

    (1)as at certain points in time leading up to his appointment Mr Bettles knew, or ought to have known, certain things about the MA Group;

    (2)more particularly as at 8 July 2016, after a meeting (see [52]-[60] below), Mr Bettles knew or ought to have known that Richard Marlborough, one of the directors of Iridium Holdings, was developing a strategy with the assistance of his professional advisors, WMS Accountants and Ramsden Lawyers, referred to as the strategy in the FASOC;

    (3)the strategy was as follows:

    (i)Marlborough would register at least one new company which would be under his effective control (via his son, Braiden, and his employed general counsel, Young);

    (ii)Marlborough would arrange for the staged winding up of the companies so as to be able to transfer the income producing assets of certain companies to such a new company;

    (iii)the new company would then be able to receive the income that would otherwise have gone to the existing companies;

    (iv)Marlborough required $500,000 in order to do this, and intended to obtain that from one or more of the entities that conducted the financial planning business or from the WIP of MM Prime Pty Ltd (20);

    (v)the professional advisors (WMS Accountants and Ramsden Lawyers) intended to enter into arrangements which would enable them to take security for past and future fees over the assets of companies in the MA Group and with the effect that their professional fees should rank ahead of non-secured creditors; and

    (vi)Marlborough wanted to limit the amounts available in MA Group companies that could be used to pay creditors, including the ATO.

    (4)the strategy was implemented through a number of steps and transactions including:

    (a)the incorporation of four new companies including: Benchmark Private Wealth Pty Ltd (BPW), Benchmark Wealth Property Services Pty Ltd (BWP Services) and Benchmark Private Wealth Holdings Pty Ltd (BPW Holdings) (collectively, Benchmark Group);

    (b)the registration of security interests in the period 13 to 19 July 2016 against one or more of the companies in the MA Group in favour of Mr Domingo, Domingo Superannuation Fund/Mellow Brae Pty Ltd, Ramsden Law Pty Ltd, WMS Solutions Pty Ltd, Crest Accountants Pty Ltd and Members Winding Up Pty Ltd;

    (c)the transfer of staff from the MA Group to BPW;

    (d)appointing Mr Bettles as voluntary administrator and/or liquidator of companies in the MA Group;

    (e)the entry into of the deed of settlement dated 19 July 2016 by SS Residential NSW Pty Ltd with Colin MacVicar (MacVicar Deed) pursuant to which Mr MacVicar was to receive, and did receive, $250,000 in return for his agreement to resign as a director of companies in the MA Group (MacVicar Payment);

    (f)in October 2016 the entry into the following management deeds:

    (i)management deed dated 11 October 2016 between BPW and MM Prime Investment Pty Ltd (MM Prime Management Deed);

    (ii)management deed dated 13 October 2016 between BPW and Capricorn Securities Pty Ltd (Capricorn Securities Management Deed);

    (iii)management deed dated 13 October 2016 between BPW and Iridium Financial Planning Pty Ltd (Iridium Financial Planning Management Deed); and

    (iv)management deed dated 20 October 2016 between BWP Services and Airlie Beach (MA) Pty Ltd (Airlie Beach Management Deed), (collectively, Management Deeds),

    in respect of each of which ASIC alleges that BPW or BWP Services did not provide any of the services which it agreed to provide as set out in each of the deeds;

    (g)payments of commissions in 2016, by Elderton Holdings Pty Ltd, a member of the RILOW Group, to Members Alliance Incorporated Pty Ltd when those payments should have been made to MM Prime pursuant to an agreement dated on or about 25 February 2015 between Elderton and MM Prime (Elderton Transaction);

    (h)the sale of the Client Book (see [395] below) to Crest Accountants; and

    (i)the ultimate disclaimer of Provincial Property Investments (Aust) Pty Ltd’s rental roll by Mr Bettles.

1. In part, ASIC’s case against Mr Bettles arises from his role in a number of the transactions that it alleges were entered into to implement the strategy.  ASIC contends:

   (1)in relation to the MacVicar Deed and the MacVicar Payment that:

   (a)by failing to investigate whether Mr MacVicar was entitled to the MacVicar Payment and by failing to take steps to prevent the MacVicar Payment Mr Bettles:

   (i)breached s 180 of the Corporations Act as an officer of Iridium Holdings; and

   (ii)breached Liquidator’s Duty No. 1 and Liquidator’s Duty No. 2 as set out in Sch C to the FASOC, which is reproduced in Annexure A to these reasons;

   (b)the failure to investigate and prevent the MacVicar Payment, the breach of s 180 of the Corporations Act and the breach of Liquidator’s Duty No. 1 and Liquidator’s Duty No. 2 are matters that can be taken into account under subss 45-1(4)(a), (b), (d) and (e) of the IPS;

   (c)having provided earlier advice to Mr MacVicar and his wife Jennifer MacVicar, referred to as the MacVicar Advice (see [44] below), Mr Bettles acted inconsistently with the spirit of cl 6.1 and cl 6.8 and Principle 2 of the Australian Restructuring Insolvency & Turnaround Association (ARITA) Code of Professional Practice (ARITA Code) by accepting appointments to act as liquidator of companies in the MA Group.  That is also a matter which the Court can take into account under subss 45-1(4)(a) and (e) of the IPS;

   (d)having accepted the appointment as liquidator of Iridium Holdings and other companies in the MA Group, the failure by Mr Bettles to investigate whether Mr MacVicar was entitled to the MacVicar Payment and to prevent the payment in circumstances where the MacVicar Advice gave rise to a relationship between Mr Bettles and Mr and Mrs MacVicar are matters that can be taken into account in considering the seriousness of the consequences of any action or failure to act by Mr Bettles, including the effect of that action or failure to act on public confidence in registered liquidators as a group under subs 45-1(4)(e) of the IPS; and

   (e)Mr Bettles was “involved”, as that word is defined in s 79 of the Corporations Act, in Mr Marlborough’s breaches of duties owed to SS Residential under s 180 of the Corporations Act. To that end ASIC alleges that Mr Marlborough breached his duty owed to SS Residential by executing, and causing SS Residential’s entry into, the MacVicar Deed and by authorising the MacVicar Payment. As to the former, ASIC alleges that Mr Bettles’ involvement arises from his knowledge of each of Mr Marlborough’s relevant acts. As to the latter, ASIC alleges that Mr Bettles aided the MacVicar Payment within the meaning of s 79(a) of the Corporations Act or, alternatively, was knowingly concerned in that payment within the meaning of s 79(c) of the Corporations Act. These are also matters which may be taken into account under subss 45-1(4)(a), (b), (d) and (e) of the IPS;

   (2)in relation to the Management Deeds that:

   (a)because of his state of knowledge of and involvement in the preparation of the various management deeds, Mr Bettles was involved in Mr Marlborough’s contraventions of each of ss 180, 181(1) and 182(1) of the Corporations Act in relation to the entry into each of those deeds and the payment made by companies in the MA Group pursuant to those deeds;

   (b)the matters pleaded in connection with the allegations at (a) above are matters which the Court may take into account under subss 45-1(4)(a), (b), (d) and (e) of the IPS;

   (c)by agreeing to, and/or allowing or failing to prevent, entry into of the management deeds and/or failing to prevent payments pursuant to those deeds by using the powers he held as liquidator of Iridium Holdings, Mr Bettles breached s 180 of the Corporations Act as an officer of Iridium Holdings and was in breach of Liquidator’s Duty No. 1 and Liquidator’s Duty No. 2 as listed in Sch C to the FASOC; and

   (d)the matters pleaded in connection with the allegations at (c) above are matters which the Court may take into account under subss 45-1(4)(a), (b), (d) and (e) of the IPS;

   (3)in relation to the Elderton Transaction that:

   (a)by failing to investigate whether MM Prime was entitled to payments pursuant to the First Tranche MM Prime Commission invoices and Second Tranche MM Prime Commission Invoices and by permitting those payments to be made to Members Alliance Incorporated rather than to MM Prime, Mr Bettles, in his capacity as an officer of Iridium Holdings, was in breach of s 180 of the Corporations Act;

   (b)Mr Bettles was in breach of Liquidator’s Duty No. 1, Liquidator’s Duty No. 2 and Liquidator’s Duty No. 4 as set out in Sch C to the FASOC; and

   (c)the matters pleaded in connection with the allegations set out at (a) and (b) above are matters which the Court may take into account under subss 45-1(4)(a), (d) and (e) of the IPS;

   (4)in relation to the sale of the Client Book:

   (a)by failing to prevent the entry into of the agreement for sale of the Client Book using the powers at his disposal Mr Bettles:

   (i)in his capacity as an officer of Iridium Holdings, was in breach of s 180 of the Corporations Act; and

   (ii)was in breach of Liquidator’s Duty No. 1 and Liquidator’s Duty No. 2 as set out in Sch C to the FASOC; and

   (b)the matters pleaded in support of the allegations at (a) above are matters which the Court may take into account under subss 45-1(4)(a), (b), (d) and (e) of the IPS; and

   (5)in relation to the disclaimer of Provincial Property’s rent roll that:

   (a)Mr Bettles, in his capacity as an officer of Provincial Property and Iridium Holdings, breached s 180 of the Corporations Act in failing to investigate the value of Provincial Property’s rent roll, in failing to properly market Provincial Property’s rent roll and in disclaiming Provincial Property’s rent roll;

   (b)Mr Bettles was in breach of Liquidator’s Duty No. 1, Liquidator’s Duty No. 2 and Liquidator’s Duty No. 4 as defined in Sch C to the FASOC; and

   (c)the matters pleaded in support of the allegations in (a) and (b) above are matters which the Court may take into account under subss 45-1(4)(a), (b), (d) and (e) of the IPS.

2. As additional matters, ASIC contends:

   (1)in relation to the members’ voluntary winding up of each of SS Residential, Iridium Financial Planning and Capricorn Securities, that Mr Bettles’ knowledge of the status of those companies at the time and of other matters which he was, or ought to have been aware, are matters which the Court may take into account under s 45-1 of IPS. ASIC further contends that by accepting the appointments of those companies, Mr Bettles breached Principle 1 and Principle 2 of the ARITA Code and Liquidator’s Duty No. 6, as set out in Sch C to the FASOC, and that these are matters which the Court may take into account under subss 45-1(4)(a) and (e) of the IPS;

   (2)in relation to the declarations of independence, relevant relationships and indemnities (DIRRI) pursuant to s 506(2) of the Corporations Act signed by Mr Bettles for ten of the companies in the MA Group, Mr Bettles failed to adequately disclose the nature of his relationship with Mr MacVicar and the nature of the MacVicar Advice which was contrary to cl 6.10.3 of the ARITA Code, contrary to the spirit of cl 6.8.1 of the ARITA Code and are matters which the Court may take into account under subss 45-1(4)(a) and (e) of the IPS; and

   (3)in relation to reports lodged with ASIC pursuant to s 533 of the Corporations Act, Mr Bettles, in making declarations as to the adequacy of the relevant MA Group company’s books and records, made a statement that he knew was false or misleading contrary to s 1308(2) of the Corporations Act, made declarations that were false and failed to discharge his obligations as a registered liquidator to obtain relevant books and records of the companies. Mr Bettles’ failure is a matter which the Court may take into account under subss 45-1(4)(a), (b) and (e) of the IPS.

3. The relief sought by ASIC as a result of Mr Bettles’ conduct in his role as liquidator of companies in the MA Group is set out at [294]-[301] of the FASOC. 

4. At [294] ASIC defines “the conduct of the Defendant” and “the assets and income streams” respectively by reference to particular aspects of Mr Bettles’ alleged conduct and the amounts allegedly either paid out or not received by MA Group companies.

5. ASIC contends that:

   (1)Mr Bettles’ conduct had the effect of avoiding or reducing scrutiny being given to elements of the strategy and its implementation and sets out why that is so;

   (2)Mr Bettles consented to act as liquidator of MA Group companies, including Iridium Holdings, when he knew or ought to have known of the strategy (as defined in [58(c)] of the FASOC) and in the circumstances pleaded at [296]; and

   (3)notwithstanding the circumstances pleaded at [296], Mr Bettles consented to act as liquidator of companies in the MA Group, took no steps to prevent the implementation of the strategy or to ameliorate its effects and engaged in conduct designed to avoid or reduce scrutiny of the strategy.

6. At [298]-[301] of the FASOC ASIC pleads that:

   298.The Court may take into account the cumulative nature and effect of the conduct of the Defendant under div. 45-1(4) of the Act.

   299.The conduct of the Defendant pleaded in paragraph 294(a) above, together with the matters pleaded in paragraphs 295, 296 and 297 above, viewed cumulatively, constituted so gross a departure from, and abrogation of, the duties of a registered liquidator, as to warrant:

   (a)the cancellation of the Defendant’s registration as a Registered Liquidator;

   (b)a lifetime prohibition on the Defendant from reapplying for registration as a Registered Liquidator;

   (c)a lifetime prohibition on the Defendant from consenting to any appointment and acting as a liquidator; and

   (d)an order that the Defendant pay ASIC’s costs.

   14.2 Individual Items of the Defendant’s Conduct

   300.Each individual item of the Defendant’s Conduct pleaded herein (being that conduct listed in paragraph 294(a) above) and the matters pleaded in paragraphs 295, 296 and 297 above, or any one of more item of the same taken in combination, is conduct which may be taken into account by the Court pursuant to div 45-1(4) of the Insolvency Practice Schedule.

   301.The conduct of the Defendant pleaded herein, viewed as individual items of conduct or one or more item taken in combination, constituted so gross a departure from, and abrogation of, the duties of a registered liquidator, as to warrant:

   (a)the cancellation of the Defendant’s registration as a Registered Liquidator;

   (b)a lifetime prohibition on the Defendant from reapplying for registration as a Registered Liquidator;

   (c)a lifetime prohibition on the Defendant from consenting to any appointment and acting as a liquidator; and

   (d)an order that the Defendant pay ASIC’s costs.

7. ASIC also contends that Mr Bettles breached his duties in relation to the liquidation of Bradford Marine by engaging in conduct which occurred after commencement of this proceeding. The relevant events are set out in Sch D to the FASOC and are more fully described below commencing at [750].

8. As is apparent from the summary set out above, ASIC contends that by his conduct Mr Bettles breached what it refers to as “Liquidators’ Duties” as set out in Sch C to the FASOC (see Annexure A to these reasons).

   2.               Facts

   2.1             Witnesses

9. Although there was a significant volume of documentary evidence relied on, there were only four witnesses. 

10. ASIC led evidence from the following witnesses:

    (1)Paul Dunn who is employed as an investigator by ASIC.  Mr Dunn conducts investigations into suspected contraventions of the laws regulated by ASIC and was in ASIC’s investigation into the MA Group, Mr Dunn was cross-examined;

    (2)Benjamin de Waard, who is employed as a computer forensic analyst by ASIC.  Mr de Ward gave evidence about the nature of metadata and his review of the metadata of two documents.  Mr de Waard was not cross-examined; and

    (3)Oliver Jones.  Mr Jones is a solicitor.  He was admitted to practice on 2 February 2009.  Mr Jones practises primarily in commercial and corporate law including advising companies from time to time about insolvency issues.  He has also undertaken some immigration and employment law.  From early 2009 to mid-February 2017 Mr Jones worked as a solicitor at Ramsden Lawyers on the Gold Coast, Queensland, principally under the direction of the firm’s managing partner, John Ramsden.  Mr Jones was involved in advising the MA Group in relation to transactions the subject of this proceeding.  He was cross-examined. 

11. Mr Bettles gave evidence in support of his defence.  His qualifications and background are set out below.  Mr Bettles was cross-examined. 

12. It is convenient at this point to make some observations about his evidence.  It was apparent that Mr Bettles did his best to assist the Court.  In addition to his detailed affidavits he provided frank answers in cross-examination and was prepared to make concessions where appropriate.  Overall Mr Bettles struck me as someone who endeavoured to do his best both professionally and in assisting the Court.

13. As is clear from Mr Bettles’ evidence he has many years’ experience as an insolvency practitioner and registered liquidator.  That said, my impression was that he had not had significant experience in large group insolvencies.  A review of his evidence and the way in which he interacted with the director of, and advisors to, MA Group companies suggested a level of naivety on Mr Bettles’ part and a complete lack of scepticism.  Mr Bettles was too trusting.  While it is not my role to speculate, it was perhaps these qualities that ultimately caused Mr Bettles to manage the liquidations as he did.  In short Mr Bettles did not strike me as someone who would act in disregard of his duties or statutory obligations.  On the contrary, he struck me as someone who is earnest and attempted to “do the right thing” when it came to understanding his role as liquidator. 

    2.2             ASIC commences an investigation

14. On 29 September 2016 ASIC commenced an investigation under s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) in relation to potential breaches of ss 184, 911A and 1041F of the Corporations Act and s 29 and s 30 of the National Consumer Credit Protection Act 2009 (Cth) by Capricorn Securities and BPW. ASIC’s investigations subsequently expanded to include, among other matters, the conduct of the liquidators, Mr Bettles and Rajendra Khatri, appointed to companies in the MA Group.

    2.3             Mr Bettles – background

15. Mr Bettles is a chartered accountant.  He graduated in 1996 with a bachelor of accounting.  He is a professional member of ARITA and is also a justice of the peace for the state of Queensland.   

16. Mr Bettles has specialised in the field of insolvency since 1995 and has been a registered liquidator under the Corporations Act since 28 August 2002.

17. Since September 2004 Mr Bettles has been a partner of Worrells Solvency & Forensic Accountants, although strictly the “partner” of the firm is Bettles Holdings Pty Ltd as trustee for the Bettles Holding Trust and Mr Bettles is its nominee.  Worrells is principally an insolvency practice, but also runs a small forensic accounting service.  It does not provide general accounting services.  Worrells has offices in Queensland, New South Wales, the Australian Capital Territory, Victoria and Western Australia.  Mr Bettles is usually based at Worrells’ office situated in Robina, Queensland which is referred to as the Worrells Gold Coast office. 

    2.4             Worrells’ file management system

18. Worrells’ offices are paperless.  All correspondence in relation to an external administration is stored electronically in files related to the relevant client.  Any paper correspondence received at the offices is scanned and saved into the relevant electronic file.  The originals are then destroyed in accordance with Worrells’ document protocol.

19. Worrells uses a proprietary file management system known as “Workbench” which comprises two parts:

    (1)a potential system (Potential System) which includes all notes and correspondence relating to discussions prior to taking an appointment; and

    (2)a general system which provides a complete record of the steps undertaken on every liquidation or administration to which members of the firm are appointed.

20. Each appointment to a particular company or entity is treated as a separate administration or liquidation.  For each appointment, a separate file is opened in Worrells’ file management system and a separate client number is allocated, even where entities belong to a group of companies.

21. Worrells’ internal system has detailed notes and procedures setting out the steps required in each administration undertaken by the firm and all enquiries conducted during an administration or liquidation are recorded electronically in this system. 

22. At the commencement of each appointment, a number of generic file enquiry documents, referred to as “file notes”, are set up which are specific to different elements of an external administration.  Each file note sets out:

    (1)a date and time of entry and the initials of the author which are automatically generated when an entry is made.  The system recognises the user by his or her login details.  Each author has unique initials assigned to them;

    (2)a general narration of the particulars in relation to that part of the external administration;

    (3)a list of the relevant legislative sections for reference;

    (4)any ASIC flowchart links and required reporting;

    (5)details of any actions that need to be undertaken in relation to that aspect of the external administration; and

    (6)a general text area where all enquiries are recorded with the date, time and initials of the person who made or who is to make the enquiry.

23. Worrells also maintains a “webnote” system which provides periodic updates, together with relevant information, reports and statutory forms for an external administration.  The “webnotes” are specific to each matter and access is password protected and available through the internet.  The password is provided to all relevant stakeholders for an external administration, such as directors and creditors.  Access to “webnotes” is available for a period of approximately six months following the finalisation of an external administration.

24. A new bank account is opened for each external administration to record receipts into and payments out of that administration.

    2.5             The MA Group

25. The ultimate holding company of most of the companies in the MA Group and more particularly of those companies relevant to this proceeding was Iridium Holdings (now ACN 161 598 938 Pty Ltd (in liquidation)).  The shareholders in Iridium Holdings were Astro Holdings Pty Ltd (in liquidation), a company controlled by Richard Marlborough, as to 50% and J.T. Prestige Pty Ltd (in liquidation), a company controlled by Mr MacVicar, as to 50%.  Messrs Marlborough and MacVicar were also directors of Iridium Holdings.

26. The companies in the MA Group which are relevant to this proceeding include:

    (1)2585 Gracemere Pty Ltd (in liquidation);

    (2)ACN 117 674 236 Pty Ltd (in liquidation), formerly Syree Enterprises Pty Ltd;

    (3)ACN 129 388 969 Pty Ltd (in liquidation), formerly Silverback Constructions Pty Ltd;

    (4)ACN 144 889 270 Pty Ltd (in liquidation), formerly Iridium Home Loans Pty Ltd;

    (5)ACN 147 346 192 Pty Ltd (in liquidation), formerly Iridium Mortgage Fund Pty Ltd;

    (6)ACN 159 641 371 Pty Ltd (in liquidation), formerly Laver Resources Pty Ltd;

    (7)ACN 161 904 776 Pty Ltd (in liquidation), formerly Members Alliance Rocket Pty Ltd;

    (8)MAIC Human Resources Pty Ltd (in liquidation);

    (9)All My Best Wishes Pty Ltd (in liquidation);

    (10)RJM Property Developments Pty Ltd (in liquidation);

    (11)Silverback Investments Pty Ltd (in liquidation);

    (12)HSINIF Pty Ltd (in liquidation);

    (13)Provincial Property;

    (14)ACN 151 259 675 Pty Ltd (in liquidation), formerly Image Building Group QLD Pty Ltd;

    (15)Trats Pty Ltd (in liquidation);

    (16)SS Residential;

    (17)Iridium Financial Planning; and

    (18)ACN 143 933 644 Pty Ltd (in liquidation), formerly Capricorn Securities;

    (19)ACN 133 019 093 Pty Ltd (in liquidation), formerly MM Prime;

    (20)MA Human Resources Pty Ltd (in liquidation); and

    (21)Airlie Beach.

1. Iridium Holdings:

   (1)was the sole shareholder of:

   (a)Iridium Mortgage Fund;

   (b)Iridium Home Loans;

   (c)Laver Resources;

   (d)Members Alliance Rocket;

   (e)MAIC Human Resources;

   (f)Provincial Property;

   (g)Silverback Investments;

   (h)SS Residential;

   (i)Iridium Financial Planning;

   (j)Capricorn Securities;

   (k)MM Prime;

   (l)Airlie Beach; and

   (m)MA Human Resources;

   (2)was the ultimate holding company of Silverback Constructions; and

   (3)held 98% of the shares in Syree Enterprises.

2. The companies in the MA Group conducted a number of businesses, primarily in Queensland, New South Wales and Victoria including:

   (1)project marketing;

   (2)finance broking;

   (3)financial planning and risk services;

   (4)property management;

   (5)construction;

   (6)lease holding;

   (7)staff and labour hire; and

   (8)investment activities on behalf of the directors of companies in the MA Group.

3. By letter dated 28 November 2014 the Australian Taxation Office (ATO) informed Iridium Holdings that it had processed its notification to register a goods and services tax (GST) group, the group was registered from 1 July 2014 and the representative member of the group was Iridium Holdings.  There were 20 other companies named as members of the group including SS Residential, Iridium Financial Planning, Capricorn Securities, MM Prime and Airlie Beach (together, the MA Trading Companies).

4. By letter dated 2 March 2015 the ATO informed Iridium Holdings that it had registered its income tax consolidated group for income tax purposes with an effective date of 1 July 2013.  The letter listed 21 companies as members of the consolidated group including four of the MA Trading Companies: SS Residential, MM Prime, Airlie Beach and Capricorn Securities.

   2.6             Mr MacVicar

5. As set out at [10(4)(e)] above Mr MacVicar was a director of Iridium Holdings.  He was also a director of a number of other companies in the MA Group.

6. Mr Bettles was first introduced to Mr MacVicar by Aaron Lavell of WMS Chartered Accountants, a firm of accountants operating on the Gold Coast, Queensland.  Mr Bettles understood that WMS was one of the largest firms of accountants operating on the Gold Coast.  Mr Bettles had known Mr Lavell for some time, having first met him in the mid-1990s through a mutual friend.  His relationship with Mr Lavell was professional with WMS referring potential clients to him.  

7. In about February 2015 Mr Lavell introduced Mr Bettles to Mr MacVicar, who was one of Mr Lavell’s clients. 

8. On 11 March 2015 Mr Bettles provided the MacVicar Advice to Mr and Mrs MacVicar.  The MacVicar Advice was addressed to Mr Lavell of WMS.  As stated at its commencement the purpose of the MacVicar Advice was to provide advice “on the adverse financial consequences to Mr Colin and Mrs Jenny MacVicar personally should the [MA Group] cease to trade in a short timeframe because of an inability to pay outstanding debts to the Australian Taxation Office”. 

9. The MacVicar Advice was detailed, spanning some eight pages and addressed the following topics:

   (1)the factual background on which the advice was based including the ownership of Iridium Holdings, the holding company of the MA Group, and J.T. Prestige which as trustee for the Denominator Trust held 50% of the shares in Iridium Holdings;

   (2)the “Areas of Exposure”.  Here Mr Bettles noted that:

   It is obviously impossible for me to advise you of every adverse financial consequence without reviewing every transaction that Mr & Mrs MacVicar and their associated entities have entered into for at least the last five years. Consequently this advice is designed to broadly identify the areas that may have a material effect on Mr & Mrs MacVicar and their associated entities, and therefore should be considered as part of a review of their affairs.

   (3)he the considered the following topics;

   (a)inter entity loans.  Mr Bettles advised that there was a need “to carefully review the balance sheets for all entities to confirm who owes what to whom” and stated:

   Some particular areas you may wish to consider are: 

   •     MA Human Resources Pty Ltd has a significant liability to the ATO.  I note that MM Prime Investments Pty Ltd acts as treasury for the [MA Group] and that MM Prime Investments Pty Ltd owes MA Human Resources Pty Ltd $4,160,087.

   Should MA Human Resources Pty Ltd be wound up then the liquidator would be looking to seek recovery of the $4,160,087 owed by MM Prime Investments Pty Ltd.  If this resulted in MM Prime Investments Pty Ltd being wound up then this could have a significant impact on the [MA Group] because the liquidator may seek recoveries of all of the loans owing to MM Prime Investments Pty Ltd.

   •     Denominator Trust owes the ATO $321,249.  Should the ATO take legal action seeking recovery of this debt then it would need to take action against the trustee, as a trust is not a legal entity and therefore cannot be sued.  The trustee is obviously J.T. Prestige Pty Ltd.

   The winding up of J.T. Prestige Pty Ltd would give control of the Denominator Trust to the liquidator by virtue of the indemnity contained within the trust deed.  The liquidator could then seek recovery of the debts owed to both J.T. Prestige Pty Ltd and Denominator Trust, which includes:

   …

   The winding up of J.T. Prestige Pty Ltd would also result in the liquidator controlling the 50% shareholding in [Iridium Holdings], which the liquidator would sell to any interested party.

   (b)voidable transactions.  Mr Bettles set out a summary of the type of transactions that can be set aside by a trustee in bankruptcy.  After doing so he noted:

   Some particular areas you may wish to consider are: 

   Ÿ[Iridium Holdings] has not paid for the purchase of Provincial Property Investments (Aust) Pty Ltd.  Rather it is intended to show a loan in the accounts of J.T. Prestige Pty Ltd, which will be offset by any amounts owing by other entities to the [MA Group].

   Should a liquidator be appointed to J.T. Prestige Pty Ltd the liquidator could argue that because J.T. Prestige Pty Ltd did not physically receive the purchase price then the transaction is a voidable transaction and the liquidator would seek the return of the shareholding in Provincial Property Investments (Aust) Pty Ltd or the amount of the purchase price.

   ŸI note your advice that Mr MacVicar’s remuneration, which is directed to Denominator Trust, is derived from a fee of $4,500 for each successful property settlement achieved by the [MA Group].  I also note that you are comfortable that this fee is reasonable.  Given the total quantum of monies paid in this area it is likely to be a matter thoroughly investigated by a liquidator and consequently, if you have not documented how you arrived at the figure of $4,500, I suggest you do so.

   (c)director penalty regime;

   (d)directors’ duties;

   (e)dividends to shareholders;

   (f)shareholding;

   (g)beneficially held shares;

   (h)director disqualification; and

   (i)association membership and practising certificates.

   2.7             The ATO serves statutory demands

10. Between 5 January 2016 and 21 April 2017 the ATO issued the following statutory demands to companies in the MA Group:

Date Of Demand	Debtor Company	Amount Of Demand
5 January 2016	Syree Enterprises	$954,098.10
5 January 2016	Gracemere	$996,615.97
5 January 2016	Astro Holdings	$681,501.63
6 January 2016	RJM Property	$549,745.62
6 January 2016	Trats	$722,837.78
23 June 2016	Iridium Holdings	$2,178,490.16
23 June 2016	Silverback Constructions	$636,148.38
23 June 2016	Iridium Mortgage Fund	$69,039.21
23 June 2016	Iridium Home Loans	$74,102.63
23 June 2016	MAIC Human Resources	$599,395.64
24 June 2016	HSINIF	$592,540.87
24 June 2016	Members Alliance Rocket	$80,790.55
24 June 2016	All My Best Wishes	$687,282.36
27 June 2016	Provincial Property	$173,282.42
7 July 2016	Image Building Group	$1,385,287.71
8 July 2016	Laver	$6,766,842.94
21 April 2017	Airlie Beach	$2,193,769.07

1. By letter dated 8 April 2016 WMS wrote to the ATO’s “Significant Debt Management” area on behalf of the “Iridium Holdings Group of Companies” (i.e. the MA Group) setting out “the taxpayer’s proposal to enter into a Deed of Compromise and meet ongoing compliance commitments”.  By letter dated 15 June 2016 the ATO refused the proposed compromise, providing its reasons for doing so and noting at the conclusion of the letter that:

   If the outstanding taxation liabilities for all entities within the Group are not paid in full immediately we will initiate action to wind up the companies by using a Creditor’s Statutory Demand for Payment.

   2.8             Ramsden Lawyers

2. Ramsden Lawyers acted for the MA Group from about June 2016.  John Ramsden was the managing partner of Ramsden Lawyers and, as set out above, Mr Jones principally worked under his supervision.

3. A new matter for the MA Group was referred to Ramsden Lawyers by WMS.  Mr Jones first became involved in the matter in about June 2016 at a meeting with Mr Ramsden.  Mr Jones recalls that during the meeting Mr Ramsden informed him that:

   (1)this would be the biggest matter of this type that the firm had ever done.  It was a corporate group insolvency and restructure of more than 20 companies;

   (2)the intention was to realise certain assets before the companies went into liquidation because, if the companies went into liquidation, they would lose their Australian Financial Services Licence (AFSL) and, as a result, certain assets, such as the insurance roll, would have a markedly decreased value or may even be worthless; 

   (3)one of the possible strategies for the restructure was to create a new corporate entity which would purchase some of the assets remaining in the MA Group;

   (4)the MA Group had significant debts owing to the ATO and the Office of State Revenue for payroll tax.  Mr Jones recalls that the MA Group was consolidated for tax purposes and had a tax liability of around $21 million; and

   (5)Ramsden Lawyers would need to secure its fees by registration of a security interest so that they would not be considered a preference if the companies went into liquidation, the companies in the MA Group were solvent and they could therefore enter into transactions with them and register a security interest for their fees but moving forward the companies would eventually most likely become insolvent.

4. At this initial meeting Mr Ramsden instructed Mr Jones to contact Mr Lavell to get the matter started.  Mr Jones did so by email sent on 1 July 2016 in which, among other things, he:

   (1)sought specified “additional material” following his review of the file; and

   (2)referred to a “new entity controlled by Braiden Marlborough”, Mr Marlborough’s son who, for ease and without intending any disrespect, I will refer to as Braiden.  Mr Jones recalled that one of the strategies being considered at the time was for a new entity (NewCo) to be set up by Braiden to purchase certain assets of the MA Group. 

5. On 5 July 2016 Mr Jones drafted a retainer letter and a security agreement to allow for registration of a security interest under the Personal Property Securities Act 2009 (Cth) (PPSA) and to ensure that both Ramsden Lawyers and WMS had documentation in place to give rise to a valid security interest under the PPSA.

   2.9             Pre-appointment meetings

   2.9.18 July 2016 Meeting

6. On 8 July 2016 Mr Bettles attended a meeting with Mr Lavell of WMS and Messrs Ramsden and Jones of Ramsden Lawyers (8 July 2016 Meeting).  Mr Bettles recalls that Mr Lavell invited him to the meeting to discuss the financial position and structure of the MA Group and the nature and general consequences of an insolvency appointment. 

7. Mr Bettles, who did not attend the entirety of the meeting, recalls that Mr Lavell did most of the talking during the meeting addressing each of the companies in the MA Group and that Mr Ramsden was also involved in the discussions.  While he cannot recall the precise words spoken, Mr Bettles recalls that the following matters were discussed:

   (1)Mr Lavell identified various companies in the MA Group and their operations and, to the best of Mr Bettles’ recollection, he went through a spreadsheet or spreadsheets;

   (2)there was a discussion about placing companies in the MA Group into insolvency administration; and

   (3)Mr Bettles was informed that there was a need to realise the assets of the MA Trading Companies before liquidating those companies, otherwise the value in those assets would be lost.

8. Upon returning to his office, Mr Bettles made a file note which is date and time stamped 8 July 2016 at 12.38 pm.  The file note records:

   JB 08/07/16 12:38 PM: Meeting with Aaron Lavell from WMS Accountants, and John Ramsden and Oliver Jones from Ramsden Law to discuss the financial position of the group.  It seems a number of the companies have received statutory demands from the ATO, some other companies are insolvent, and some companies are solvent but their sole shareholders are insolvent.

   Aaron ran through the operations of each entity.  John indicated that he was doing a review of all of the companies to provide advice to each of them on their solvency position.  It seems likely that the whole group will ultimately fail and Richard (director) will end up bankrupt, but the liquidations of each company will need to be staged because in some cases assets need to be realised prior to liquidation otherwise the value in the asset will be lost.

   Aaron is to email me his spreadsheets on what each company does and which companies have received statutory demands.

9. According to Mr Bettles, given the generality and high level of the discussion, at the conclusion of the meeting he had no specific knowledge of the financial affairs of the MA Group. 

10. Mr Bettles was cross-examined about the 8 July 2016 Meeting.  He maintained that he did not believe that there was any discussion to the effect that Messrs Lavell and Ramsden would put a proposal to him as to the order in which companies in the MA Group were to be placed into liquidation.  Rather, he recalled that Mr Ramsden was still undertaking a review of the solvency of each of the companies in the MA Group at the time, although there was discussion about issues that arose in relation to some of the companies in the group.

11. However, Mr Bettles accepted that by the end of the 8 July 2016 Meeting, he was aware:

    (1)there was a special purpose human resources company in the MA Group which was indebted to the ATO; and

    (2)of Airlie Beach and probably aware that it held management rights for a building known as “the Summit”.

12. Mr Jones also gave evidence about the 8 July 2016 Meeting.  Based on the work in progress report for the matter maintained by Ramsden Lawyers (WIP Report), the meeting went for five hours although, as Mr Jones accepted in cross-examination, that timing included travel time from Ramsden Lawyers’ offices to WMS’ offices at Robina, Queensland, where the meeting took place.  Having regard to travel time Mr Jones accepted that the meeting time was closer to four hours in length and he recalled that it ended near the end of the working day.  Mr Jones could not recall when Mr Bettles left the meeting.  However, it is clear that by 12.38 pm, when he recorded his file note, Mr Bettles was back in his office and, given Mr Jones’ evidence as to when the meeting ended, that Mr Bettles was not present for its entirety.

13. Mr Jones did very little talking during the meeting.  His role was to take notes, which he did on his iPad.  Mr Jones’ notes comprise six pages.  Although he cannot now recall who said what at the meeting, by reference to his notes he recalls that:

    (1)as reflected on the first page of the notes, there was discussion about:

    (a)the assets which remained within various companies in the MA Group, which in many cases were trail commissions being received under various agreements;

    (b)checking with Liam Young, the general legal counsel of the MA Group and the sole director of BPW, BPW Holdings and Young Corporation (NSW) Pty Ltd, about whether any companies on which a statutory demand had been served were complying with payment arrangements, including checking those companies with “Image” in their names;

    (c)a company called “Iridium Home Loans” and determining if the trail agreements would cease upon certain events occurring, such as liquidation;

    (d)financial reports in relation to various of the MA Group companies which were reviewed during the meeting;

    (e)various trail commissions being received by companies in the MA Group;

    (f)Capricorn Securities, which held an AFSL, and Iridium Financial Planning, which was an authorised corporate representative under that AFSL, that a statutory demand for about $70,000 had been issued to Capricorn Securities, concern that the trailing commissions received by Capricorn Securities would cease if it went into liquidation based on that demand and whether the statutory demand should be paid in order to avoid that consequence;

    (g)JP Downey of Downey and Co and MA Human Resources, which was in receivership;

    (h)Iridium Home Loans paying the statutory demand, selling off its assets and putting that company into administration to effect the sale of assets or perhaps entering into a deed of company arrangement (DOCA);

    (i)Airlie Beach, including that it had management rights to certain properties located at Airlie Beach which David Domingo, a director of various companies in the MA Group, wanted, that Mr Marlborough had not allowed Mr Domingo to take these management rights because he had already taken an asset worth $3 million, which concerned the Prime Securities Income Trust, and that Mr Domingo was aware that Mr Bettles would likely try to recover the $3 million asset once he was appointed liquidator;

    (j)the taxation liability of the MA Group, that the MA Group was a consolidated group for tax purposes under a tax sharing arrangement which meant that there was joint and several liability for tax debts and whether the ATO would make a decision to treat the MA Group as a group for taxation purposes.  In cross-examination Mr Jones accepted that the effect of the discussion was that payroll tax would likely be consolidated but that it was not known at that time whether other taxation liabilities would be consolidated by the ATO;

    (k)the trail book of Capricorn Securities and Iridium Financial Planning and, if it was not sold before those companies went into liquidation, the book would not have any value if sold by liquidators because liquidation would mean loss of the AFSL and would result in the trail providers no longer paying the trail commission;

    (l)the NewCo arrangement.  The notes state “Richard’s son will create new entity with Liam as sole director and shareholder.  Ownership of the trustee co, will also be Liam”.  This was a reference to Braiden, Mr Young and the NewCo arrangement as referred to at [50(2)] above;

    (m)Provincial Property and that it had rental property management rights to a large number of properties in certain regional cities; and

    (n)Mellow Brae, a company associated with Mr Domingo, and a second mortgage book relating to the Prime Securities Income Trust;

    (2)as reflected on the second page of the notes, there was discussion about:

    (a)the transaction with Mr Domingo concerning the Prime Securities Income Trust;

    (b)a $4 million asset which was the same asset as referred to at [59(1)(i)] above.  During the discussion that asset was variously referred to as being worth between $3 and $4 million;

    (c)MM Prime which had an asset in relation to certain work in progress from property development and that Mr Marlborough wanted to buy this business in order to collect the work in progress.  I note that in his notes Mr Jones recorded that:

    Richard will want to buy this business and carry on but Richard needs $500K to get them to continue business so can collect WIP.  Only way to pull out is the below $400K from the planning business but that will take 90 days.  Every day there is settlements that said.

    (d)various options for the liquidation of the companies in the MA Group; and

    (3)as reflected on the third page of the notes, there was discussion about:

    (a)the current employees of the MA Group and that Mr Marlborough would employ some of them in NewCo;

    (b)Mr Lavell being prepared to accept $130,000 or $140,000 in satisfaction of the outstanding amount of $165,000 owing to WMS for fees;

    (c)what Mr Bettles could do once appointed as liquidator of Iridium Holdings, the sole shareholder of companies in the MA Group.  Mr Ramsden noted that Mr Bettles could wind up each of the subsidiary companies;

    (d)whether the liquidator could access funds held in trust.  There was $450,000 available which could be used to pay WMS’ outstanding fees with the balance, of $350,000, available for use by Mr Bettles in the liquidation;

    (e)a deed with the NSW government concerning a payment to SS Residential;

    (f)ensuring that Capricorn Securities kept its AFSL by paying its debts and avoiding going into liquidation, the need to keep the responsible manager in order to maintain the AFSL and that he may need to be paid;

    (g)tax liability, as to which Mr Bettles made a comment about the tax liability for the consolidated group;

    (h)WMS’ and Ramsden Lawyers’ fees.  This included a detailed discussion about how WMS’ past fees could be secured and Mr Ramsden’s suggestion, in relation to Ramsden Lawyers’ fees, that a security interest provision be inserted into its fee agreement which would make all of the MA Group companies liable for the fees and allow Ramsden Lawyers to register a security interest.  The reference in Mr Jones’ notes to “Getting $450 once deed is signed” was a reference to an amount of about $450,000 which SS Residential expected to receive once the deed with the NSW government was signed; and

    (i)the obligation of other MA Group members to pay Ramsden Lawyers’ fees.  Mr Jones explained that his file note refers to issuing a demand to SS Residential or Airlie Beach because those companies had an asset upon which demand could be made.

1. At the end of the third page of his notes Mr Jones recorded “Telephone attendance with Richard following meetings”.  Based on his review of the subsequent pages of his notes, Mr Jones believes that he and Mr Ramsden had a telephone discussion with Mr Marlborough following their meeting with Messrs Lavell and Bettles. 

   2.9.214 July 2016 Email

2. On 14 July 2016 at 11.36 am Mr Young sent an email to Messrs Ramsden and Jones, copied to Mr Marlborough and Genevieve White of Ramsden Lawyers, setting out NewCo’s requirements in relation to “its management of current business of the [MA Group] of companies for an appointed liquidator” (14 July 2016 Email).  The 14 July 2016 Email referred to the “operations of NewCo” and NewCo’s requirements as follows:

   1.Payment of all property management fees paid to Provincial Property Investments Pty Ltd (PPI) and Airlie Beach (MA) Pty Ltd until such time as a Deed of Company Arrangement (DOCA) has been entered into and the Airlie Beach management rights are sold;

   2.NewCo will offer to pay the existing ATO debt of PPI at 100c in the dollar as part of a DOCA in order to continue the operations of the company;

   3.Payment of all trail income received by Capricorn Securities Pty Ltd and Iridium Financial Planning Pty Ltd in order to manage existing WIP while a sale to market is arranged;

   4.Payment of 25% of any up-front commissions received in order for NewCo to pay relevant incentives to retained staff to complete existing WIP;

   5.Any costs to maintain Capricorn or Iridium Financial Planning are to be paid from the remainder of up-front commissions received. This includes (but is not limited to) payment of the existing statutory demand, any required professional indemnity insurance and financial planning software;

   6.The full sale price achieved for financial planning asset will be made available to the liquidator, once such sale is finalised;

   7.In relation to MM Prime Investments Pty Ltd, NewCo to split WIP on a 50/50 basis for all settled sales;

   8.In order to ensure NewCo has cash flow at the front end it will require 100% of sales for the first 10 settlements;

   9.NewCo will split settled WIP on a 50/50 basis for the next 20 settled deals;

   10.Thereafter, NewCo will split settled WIP on a 50/50 basis with adjustments to be made in order for the liquidator to recover the 50 share of commissions retained by NewCo on the initial 10 settlements;

   11.Any costs required to manage existing WIP are to be met by the portion of funds retained by the liquidator. This would include, though is not limited to, maintaining the existing CRM and cloud access to allow NewCo access to client data; and

   12.Payment of Sydney rent to be met until payment of funds from Transport NSW is received, NewCo to be given access to the Sydney premises in this time.

   2.9.314 July 2016 Meeting

3. Mr Bettles next met with Mr Ramsden on 14 July 2016 to discuss the operations of each of the companies in the MA Group and the nature and consequences of an insolvency appointment (14 July 2016 Meeting).  Mr Bettles could not recall the detail of what was discussed at that meeting and his file note of the meeting lacks detail.  He could not recall discussing the 14 July 2016 Email at the 14 July 2016 Meeting and his evidence, which I accept, is that he did not receive the 14 July 2016 Email until after the 14 July 2016 Meeting (see [102] below).

4. Mr Jones, who also attended the meeting, recalls that the purpose of the meeting was to discuss the strategy of how they would proceed with NewCo including the management of funds, the management of assets by NewCo and realisation of those assets.  In his evidence in chief, Mr Jones said that he recalled that Mr Bettles approved “the strategy for the NewCo”.  He understood from Mr Ramsden that he was not prepared to proceed with the strategy without Mr Bettles’ approval because he did not want the liquidator to undo, at a later stage, what had been done.  Mr Jones said he recalled this because it gave him comfort to know that Mr Bettles was on board with the “strategy”. 

5. However, in cross-examination Mr Jones’ recollection was undermined.  He accepted two things: first, that he does not identify in his evidence the content of the “strategy”; and secondly, his understanding that the “strategy” was approved by Mr Bettles was based on information he received from Mr Ramsden and not Mr Bettles directly.  In addition, Mr Jones could not recall that the 14 July 2016 Email was discussed at the 14 July 2016 Meeting.

   2.9.416 July 2016 Meeting

6. On 16 July 2016 Mr Bettles attended a meeting with Mr Lavell and Justin Wowk from WMS, Messrs Marlborough and Young and Braiden (16 July 2016 Meeting).  Mr Bettles does not have a specific recollection of what was discussed at that meeting but his file note of the meeting records:

   Meeting with Aaron Lavell and Justin from WMS Accountants, Richard (director), Braydon (Richard’s son), Liam (former legal counsel) to go over the operations of each of the companies.  The operations are set out in a powerpoint presentation that Aaron will email me.  Just need to remember that:

   1. there are 21 cars leased from SGI Fleet.  They will arrange for the vehicles to be dropped at SGI depots around the country

   2. the records are saved on a server in the cloud.  Maintaining that server is necessary to complete the wip and sell the books and trails.  Cost is $11,000 per month.

7. Following the 16 July 2016 Meeting Mr Bettles thought that the records “stored in the Cloud” were the books and records of the whole of the MA Group.

   2.9.5Mr Bettles’ general recollections of discussions at the pre-appointment meetings

8. Mr Bettles recalls a number of matters that were discussed at the pre-appointment meetings described above but, other than those matters raised by Mr Marlborough which must have occurred at the 16 July 2016 Meeting, he cannot recall at which particular meeting they were discussed.  The matters which Mr Bettles recalls were discussed were:

   (1)a conversion of assets belonging to the MA Trading Companies was to occur within a short time.  Mr Bettles was told that if those companies went into administration immediately, the assets would not be realised for their proper value and therefore they should be wound up at a later date so that asset values were not lost;

   (2)in the interim, the MA Trading Companies did not have any staff.  Thus the assets would need to be managed by someone other than the directors of the MA Trading Companies;

   (3)Mr Young, who previously worked for the MA Group, was the appropriate person to do so.  He was already operating a similar but smaller business to that conducted by the MA Group.  Mr Bettles does not recall whether the name “Benchmark” was used during the discussions;

   (4)statutory demands had been issued by the ATO and he would be sent further information in relation to which companies had received those demands;

   (5)he was asked what a liquidator would do in certain circumstances but can no longer recall the circumstances put to him;

   (6)Messrs Lavell and Ramsden informed him that each of the MA Trading Companies were solvent;

   (7)there would be no employees left in the MA Group companies;

   (8)Mr Young’s companies would be assisting the MA Trading Companies to continue to trade or to service their clients so that the value of their assets could be preserved and then realised.  Mr Bettles understood that this would mean that more funds would then flow to Iridium Holdings, as the sole shareholder of those companies;

   (9)the entire MA Group started within MM Prime, which conducted a project and property marketing business, that he would not be appointed to MM Prime yet as it was one of the MA Trading Companies that was to continue to trade to recover work in progress and that MM Prime was not to be placed into liquidation so that referral fees could be collected from developers and builders.  The house and land packages gave purchasers opportunities to terminate their contracts.  For the property marketer to receive its referral fees, it worked as a liaison between the purchasers and developers/builders to ensure that the contract settled and that they thus received those fees.  Mr Bettles recalls that he was told that all employees in the MA Group would be terminated prior to the commencement of the insolvency administration and thus it would not be possible for an insolvency practitioner to service the clients which would likely see the contracts terminated and no referral fees paid;

   (10)in relation to SS Residential, that if it was placed into administration the moneys to be paid by the landlord for the surrender of the lease of a building in Sydney would not be paid and, upon the moneys being paid by the landlord for the surrender of the lease to SS Residential, that company would be placed into a members’ voluntary liquidation to enable the distribution of the funds to Iridium Holdings as its sole shareholder;

   (11)in relation to Capricorn Securities and Iridium Financial Planning:

   (a)that both of these companies were solvent;

   (b)Capricorn Securities was the holder of an AFSL and Iridium Financial Planning was its corporate authorised representative;

   (c)as the AFSL authorised representative, Iridium Financial Planning’s business included financial planning, insurance sales and investment services and it received commissions and was entitled to trailing commissions with respect to the insurance business if clients took up investments;

   (d)Capricorn Securities would lose its AFSL upon the appointment of an external administrator and the business would lose value once the companies entered into administration because the agreements with the providers included clauses that entitled them not to continue to pay commissions upon the AFSL being lost or the holder of the AFSL being placed in external insolvency administration.  Mr Bettles explained that, as an insolvency practitioner, he had experience in administrations of holders of AFSLs or, alternatively, authorised representatives losing the entitlement to commissions upon an administration and the providers refusing to continue to pay the commissions;

   (e)Mr Young, through his company or companies, would be engaged to service the existing clients and to provide the services required to retain these clients so that the entitlement to trailing commissions was preserved; and

   (f)subsequent to the realisation of the assets of Capricorn Securities and Iridium Financial Planning, those companies would be placed into a members’ voluntary liquidation and those funds would be available to be distributed to their shareholder, Iridium Holdings; and

   (12)there was discussion about Airlie Beach to the following effect:

   (a)that Airlie Beach provided real estate and management rights services as a caretaker and operator of a leasing business for apartments located in Airlie Beach, Queensland;

   (b)there was a concern that a sale by an insolvency administrator would negatively affect the ability to realise the management and letting rights for proper value; and

   (c)subsequent to the realisation of its assets, Airlie Beach would be placed into a members’ voluntary liquidation and those funds would be available to be distributed to the shareholder, Iridium Holdings.

9. In cross-examination Mr Bettles accepted that prior to his appointment to Iridium Holdings he was aware that:

   (1)staffing would be an issue for the MA Trading Companies and that they would not be able to trade because they did not have any employees.  Mr Bettles understood that the staff had been terminated, he assumed by Mr Marlborough or the directors of MAIC Human Resources, one of the main labour hire companies within the MA Group.  He did not really consider what became of those employees;

   (2)the NewCo group was going to be controlled by Mr Young, the former general counsel for the MA Group, and that Mr Marlborough was also going to be involved.  Mr Bettles said that he was informed at the pre-appointment meetings that Mr Young had a business that was similar to the business carried on by the MA Group, albeit smaller; and

   (3)MAIC Human Resources continued to employ staff and, on his appointment to Iridium Holdings on 22 July 2016, the remaining time of those employees with the MA Group was to be short as they were to be employed by NewCo.  Mr Bettles accepted that he knew, at the very latest by 20 July 2016, that BPW was going to employ staff that worked for the MA Group.

   2.10           The WMS PowerPoint

10. Mr Jones recalls that he, Messrs Ramsden and Bettles were first shown a PowerPoint presentation by Mr Lavell (WMS PowerPoint) during the 8 July 2016 Meeting.  Despite that, in cross-examination Mr Jones accepted that he did not make specific reference to the WMS PowerPoint in his notes of the 8 July 2016 Meeting.  Insofar as his notes of the 8 July 2016 Meeting recorded the words “saw financials”, Mr Jones maintained that he saw the financials for the group entities at the meeting as well as the WMS PowerPoint showing all of the assets and liabilities of each member of the MA Group.  Mr Jones’ evidence was that the WMS PowerPoint was a WMS document and, as far as he is aware, no one at Ramsden Lawyers made any amendment to it once it was provided to the firm.

11. Mr Bettles recalls that Mr Lavell referred to a PowerPoint presentation at the 16 July 2016 Meeting, as referred to in his file note of that meeting (see [65] above), and that the WMS PowerPoint was not referred to at the 8 July 2016 Meeting. 

12. Ultimately in the evidence before me there were five versions of the WMS PowerPoint.  They were:

    (1)the version which ASIC contends was discussed at the 8 July 2016 Meeting (WMS PowerPoint V1);

    (2)the version updated on or about 11 July 2016 (WMS PowerPoint V2);

    (3)the version updated on or about 12 July 2016 (WMS PowerPoint V3);

    (4)the version updated on or about 13 July 2016 (WMS PowerPoint V4); and

    (5)the version updated on or about 20 July 2016 (WMS PowerPoint V5).

13. ASIC contends that WMS PowerPoint V1 was shown at the 8 July 2016 Meeting.  As set out above, Mr Jones’ and Mr Bettles’ evidence are at odds as to whether there was a PowerPoint presentation at that meeting.  Mr Jones’ notes, which are relied on by ASIC and which are comprehensive, do not record that a PowerPoint presentation was shown at the meeting. 

14. At first Mr Jones gave evidence that WMS PowerPoint V5 was shown at the 8 July 2016 Meeting but when it was pointed out to him in cross-examination that WMS PowerPoint V5 included dates that post-dated the 8 July 2016 Meeting Mr Jones accepted that that version could not have been shown at that meeting.  That revelation caused ASIC to undertake a further search in the course of the trial of the documents it held relating to its investigation and led to production of the five versions of the WMS PowerPoint set out above.

15. It also became apparent that on 7 July 2016 Loren McFarlane, executive assistant to Mr Lavell, forwarded a package of material which included WMS PowerPoint V1 to, among others, Messrs Jones and Ramsden with a message:

    Please see attached documents as per Aaron’s email below. Richard will check for factual accuracy and may have further changes tomorrow.

16. Based on Ms McFarlane’s email Mr Jones gave evidence that WMS PowerPoint V1 was shown electronically at the 8 July 2016 Meeting.  However, in cross-examination Mr Jones conceded that he could not be sure that it was WMS PowerPoint V1 that was shown at the 8 July 2016 Meeting and that it could have been another version of the same document.

17. The state of the evidence in relation to whether a PowerPoint presentation was shown at the 8 July 2016 Meeting and, if so, what version is unsatisfactory.  The highest it goes is that it is possible that a version of the WMS PowerPoint was shown at the meeting and, taking Mr Jones’ evidence as a whole, it is likely that it was WMS PowerPoint V1 but he cannot be sure. 

18. Turning to WMS PowerPoint V5, in an email dated 20 July 2016 Mr Bettles requested Mr Lavell to:

    … please forward to me that powerpoint presentation we keep looking at.  The one that sets out your notes on each company’s operations.

19. Later that day Mr Lavell emailed Mr Bettles the requested PowerPoint presentation, which was WMS PowerPoint V5.  Mr Bettles saved a copy of Mr Lavell’s email and WMS PowerPoint V5 to Worrells’ Potential System.  

20. Mr Bettles was cross-examined about this evidence and, in particular, his email dated 20 July 2016 (see [77] above).  He disagreed that he had seen versions of the WMS PowerPoint at the pre-appointment meetings prior to the 16 July 2016 Meeting.  He suggested that his reference to the “PowerPoint presentation we keep looking at” was infelicity of expression and that, while he had seen a PowerPoint presentation at the 16 July 2016 Meeting, he had only been shown spreadsheets at earlier meetings.

21. As Mr Bettles requested that the PowerPoint presentation that he had seen be sent to him, his usual practice would have been to review it on receipt. 

22. Mr Bettles does not recall amending WMS PowerPoint V5 (Amended WMS PowerPoint) although he accepts that he did so.  That must be the case given that the evidence relied on by ASIC confirms that it was Mr Bettles who made the modifications which resulted in the Amended WMS PowerPoint and it is the Amended WMS PowerPoint which is linked to each of the “100 Overview” file notes for the companies in the MA Group to which Mr Bettles was appointed as external administrator. 

23. On 23 July 2016, at the time of linking the Amended WMS PowerPoint, Mr Bettles added the following entry under the heading “initial conversation with director”:

    Here is a handy PowerPoint presentation prepared by WMS Chartered Accountants that sets out all the companies in the Members Alliance business and what each does.

    Mr Bettles said that both WMS PowerPoint V5 and the Amended WMS PowerPoint are referred to in those file notes and were available to all partners and staff who worked on the external administrations of the companies in the MA Group to which he and Mr Khatri of Worrells’ Brisbane office were appointed.

24. Mr Bettles said that as best he can determine, the difference between WMS PowerPoint V5 and the Amended WMS PowerPoint is the deletion of slides 2 and 3 appearing in the former so that they did not appear in the latter.  Slides 2 and 3 in WMS PowerPoint V5 were as follows:

    Slide 2

    Slide 3

25. Mr Bettles said that those slides were irrelevant to his appointment and would be irrelevant to tasks to be undertaken by him and his staff in the insolvency administrations of MA Group companies because:

    (1)the timeline in slide 2 was of no relevance.  Mr Bettles had not been appointed as liquidator or administrator to any company in the MA Group at either of the dates referred to in that slide.  In Mr Bettles’ experience timelines are elastic and the dates shown are imprecise; and

    (2)the proposed staff in slide 3 were of no relevance to Mr Bettles as they were to be employed by a company owned and operated by Mr Young, Mr Bettles was not to have any role in that company and he had been told that the companies to which he was to be appointed had no staff. 

26. Mr Bettles disagreed that he removed slide 2 and 3 from WMS PowerPoint V5 to create the Amended WMS PowerPoint because those slides would have alerted other Worrells staff working on the administrations to the fact that there was a timeline for the creation of the NewCos, that there was a proposed list of staff to be transferred from the MA Group to the NewCos and that there was a plan to move staff to the NewCos and to set up a mirror image of companies and which would have caused his staff to make enquiries about exactly what was going to happen.

    2.11           Mr Bettles’ knowledge

    2.11.1Mr Bettles’ knowledge as at 8 July 2016 including the strategy

1. Mr Bettles believed that the fact that all realisations from the sale of the Chose in Action would be consumed by the liquidation remuneration and costs was merely a consequence, and not the purpose, of accepting Mr Clark’s offer on a conditional basis.  He believed the same consequence would have resulted from acceptance of Helicopter Aerial Surveys’ proposal (see [815] above).

   7.1.3.2Notification to Helicopter Aerial Surveys of conditional acceptance of offer 

2. By email sent on 11 August 2021 at 12.03 pm Dr Marinac sought confirmation, among other things, from Mr Bettles as to whether another offer was received prior to 5.00 pm the previous day and that Mr Bettles will still provide notice under s 100-5(3) of the IPS if the assignment is proposed to be made in favour of someone other than Helicopter Aerial Surveys.  Dr Marinac’s email noted that, should Mr Bettles propose an assignment in favour of anyone connected to Mr Clark or Bradford Marine “even tangentially”, his client required that connection to be made explicit in Mr Bettles’ notice.

3. By email sent on 11 August 2021 at 2.28 pm Mr Bettles sent a letter to Dr Marinac notifying Helicopter Aerial Surveys that Mr Clark had made a competing offer and that his offer had been conditionally accepted on the basis that it was more beneficial to the company’s creditors.  The letter stated:

   I refer to your recent correspondence in respect to your client, Helicopter Aerial Surveys Pty Ltd, and its offer to purchase the chose in action.

   I advise that Mr Martin Clark has submitted a competing offer to purchase the chose in action which is more beneficial than the offer submitted by your client. Mr Clark’s offer has been accepted subject to:

   1.remittance of the non-refundable upfront contribution of $5,500 to my office (required to cover the costs of the liquidators’ independent legal costs in considering the proposed assignment and associated deed).

   2.the outcome of independent legal advice sought in respect to the proposed assignment and deed.

   3.execution of a mutually acceptable deed of assignment.

   Once the matter has been finalised creditors will updated by way of a report.

4. By his email response dated 11 August 2021 at 2.42 pm Dr Marinac informed Mr Bettles that BMG Legal was expecting instructions to take immediate steps and that Worrells made a decision that was “self-evidently calculated to defeat, rather than advance, the interest of creditors”, failed to make proper enquiries as to debts owed to the business and failed to have the business properly valued by an appropriate expert.

5. By email dated 11 August 2021 at 6.00 pm Dr Marinac sent a letter to Mr Bettles informing him of Helicopter Aerial Surveys’ view that there was no way in which an assignment to Mr Clark of the right to sue entities controlled by Mr Clark could possibly be in the interests of the creditors to whom Worrells had a fiduciary duty.  Helicopter Aerial Surveys demanded that Mr Bettles take no steps in relation to the assignment and that he advise immediately that the assignment to Mr Clark would not proceed noting that, failing this, an urgent application may be made for Mr Bettles’ removal as liquidator and for injunctive relief against the assignment.

6. On 13 August 2021 Mr Bettles had a telephone conversation with Dr Marinac to explain why he had decided to accept Mr Clark’s offer on a conditional basis.  Mr Bettles said that Dr Marinac asked for the quantum of Mr Clark’s offer which he refused to give on the basis that there were still a number of conditions to fulfil and if they were not fulfilled, then the sale would not proceed.  During the course of their conversation they had an exchange to the following effect:

   Dr Marinac:     You did not set a deadline tor final offers and my client is entitled to counter-bid.

   Mr Bettles:I was trying to avoid a “Dutch Auction” style by setting a deadline in the Advice given on 19 July 2021.

   Dr Marinac:     There was nothing that prohibited a “Dutch Auction” style scenario.

   Mr Bettles:In this case I had preferred to set a final date for parties to submit the best offer.  If Helicopter Aerial was assigned the chose in action, ran it, and made recoveries then those recoveries were for the benefit of Helicopter Aerial only and not for the benefit of the whole body of creditors.  I can only consider the funds that would be received by Mr Robba and I on the sale, not the possible funds that would be received by one creditor being your client.  My acceptance of Mr Clark’s offer was conditional.  If I receive legal advice to say that I cannot assign the chose in action, the assignment will not be made.

7. Later that day Dr Marinac sent an email to Mr Bettles referring to their telephone conversation that morning.  The email stated:

   I would like to confirm my understanding of the content of that conversation please.  As I understand it, the following represents a reasonable summary of your view.

   1.The letter of 19 July was intended as an invitation to creditors to provide their best and final offer.

   2.You have not spoken directly with Clark but you have had discussions with his accountant and his solicitor.

   3.Whilst there is no caselaw on whether an assignment can be purchased by the defendant with a view to extinguishing it, there is regulatory guidance from the UK which seems to suggest this is allowable, and therefore any allegation that the assignment would merely protect a prior creditor-defeating disposition is irrelevant

   4.Your view is that any offer which provides a higher amount to creditors is automatically more favourable to creditors, even if only by $100 (noting that the $100 figure was raised by me, not by you)

   5.You are not prepared to disclose what offer has been made by Clark

   6.You are not prepared to take into account the potential benefit to our client because that benefit would accrue just to our client, and not to creditors generally

   7.You are now obtaining legal advice in relation to the proposed assignment, which you expect to receive in about 4 weeks

   8.You will not be acceding to our client’s demand that the proposed assignment not proceed

   9.You are prepared to put all of this advice in writing, but not for some weeks until you have received legal advice regarding the assignment

   If any of this is mistaken, I would be grateful for your most urgent written advice to that effect.

8. Mr Bettles explained the reason he adopted the best and final offer process was based on the following relevant considerations:

   (1)upon receiving the offer and terms from Helicopter Aerial Surveys, he needed to assess the potential value of the assignment and notify Bradford Marine’s creditors of the proposed assignment pursuant to s 100-5 of the IPS;

   (2)the advice from Lewis Marine noted that the value of the business was not more than the amount for which it was sold;

   (3)to date no creditors had advised any interest in funding further investigations into the pre-appointment sale of the Bradford Marine Business and/or any other matters outlined in the Second Report to Creditors (including an insolvent trading claim);

   (4)the amount offered by Helicopter Aerial Surveys was not going to result in a dividend to Bradford Marine’s creditors;

   (5)as limited funds were available, a first and final offer process was the most time efficient and commercial way to allow potentially interested parties to put forward an offer and for that offer to be quickly assessed and finalised, again noting that it was likely there would be no return to Bradford Marine’s creditors;

   (6)in order to sell the Chose in Action at auction, he would have needed to come to a conclusion about what the liquidators were selling and prepare an agreement setting out the terms of the sale.  In order to do so, Messrs Robba and Bettles would have needed additional funding to conduct further investigations, seek legal advice, prepare a contract of sale and engage an agent; and

   (7)subject to the legal advice that was to be obtained, there appeared to be nothing precluding Messrs Robba and Bettles from entering into an assignment with Mr Clark.

   7.1.3.3Engagement of CML

9. On about 13 August 2021 Mr Clark provided $5,500 to Worrells to obtain legal advice.

10. On 13 August 2021 at around 10.07 am Mr Bettles had a telephone conversation with Derek Cronin of Cronin Miller Litigation (CML) for the purposes of engaging that firm to provide legal advice in relation to the assignment of the Chose in Action.  Mr Bettles’ file note records:

    Telephone out-Derek Cronin to give him the heads up about what has happened and what I need him to do.  After much discussion we agreed that we would ask Derek for:

    1.advice on whether the process we had gone through to offer the action was okay.

    2.advice on whether we could complete a sale to Mr Clark and any changes to the draft deed

    3.a draft letter to Pacific Maritime responding to their queries.

11. Mr Bettles instructed his staff to prepare a brief to CML enclosing relevant documents.  His file note records:

    Art/Lee, as James requested please prepare the brief to [CML]. You will need to enclose at least all the advices to creditors, correspondence with Pacific Maritime (including recent emails & letters with threats) and [BMG Legal] about the assignment, references to AFSA, UK OR, and Dye & Co, my file note of the discussion with Mr Marinac today and his email about our conversation, Pacific Maritime’s letter to the ATO Phoenix Taskforce, and note our WIP so that [CML] understands that creditors won’t actually get a return.

    7.1.4The Originating Application Conduct

12. On 16 August 2021 Helicopter Aerial Surveys filed an originating application in the Supreme Court of Queensland seeking an order under s 90-15 of the IPS removing Messrs Bettles and Robba as joint and several liquidators of Bradford Marine and for an independent liquidator to be appointed.

13. On 23 August 2021 Mr Bettles had a telephone conversation with Kara James of CML in which he said to Ms James that CML was to appear at the hearing of the originating application on 25 August 2022 on behalf of Messrs Bettles and Robba and set out “all that had happened in the winding up”.   Mr Bettles’ file note of that telephone conversation records:

    Telephone in-Kara James from [CML] who advised that counsel had spoken to Helicopter Aerial’s counsel who had indicated that we are the meat in the sandwich of a personal issue between two guys who don’t like each other. It seems Helicopter Aerial are anxious to have the matter head on Wednesday without a meeting of creditors, and so we agreed that we would appear, set out all that had happened, note that we didn’t understand what we had done wrong to require replacement but in any event would abide by the orders of the court. It was agreed that we would prepare a draft of the affidavit and [CML] would investigate what the cases say on this point.

14. On 24 August 2021 Mr Bettles had a telephone conversation with Mr Grant in advance of the hearing of Helicopter Aerial Surveys’ application.  Mr Bettles’ file note of that conversation records:

    Telephone in-Shane Grant from BMG Legal following up on the deed because with the court hearing tomorrow his client wanted to sure up his position. I said that given we are on notice of the application to have us removed, the applicant wants to proceed to have the matter heard tomorrow, and one of the grounds of the application seems to be that the applicant doesn’t want the action sold to Shane’s client, it is inappropriate for us to issue a draft deed in relation to the sale. I said that we would explain to the court what had happened, that Shane had put us on notice that his client reserved their rights to sue us if we don’t complete, and that whilst we aren’t fighthing the application we don’t understand what we have done wrong to deserve being removed. I said I would let him know the outcome of the hearing. 

15. Mr Bettles’ evidence is that he now knows that the originating application was opposed on his and Mr Robba’s behalf.  He said that such opposition was contrary to instructions he gave to CML in his telephone discussion with Ms James on 23 August 2021.  While Mr Bettles accepted in cross-examination that it is unusual that a lawyer would appear on an application and oppose removal when he had given instructions to the contrary, he was not challenged about his contemporary record of his instructions to CML. 

16. On 25 August 2021 the originating application was heard by Boddice J in the Supreme Court of Queensland.  The Court made orders removing Messrs Bettles and Robba as liquidators of Bradford Marine, appointing a new liquidator and that Helicopter Aerial Surveys’ costs be costs in the winding up of Bradford Marine.  Christopher Baskerville of Jirsch Sutherland was appointed as replacement liquidator.   

17. Mr Bettles said that, as at the date of the hearing of the originating application, he had not received a request from any of Bradford Marine’s creditors to call a meeting for the purpose of passing a resolution to remove him and Mr Robba as liquidators.

    7.2             Consideration

18. As ASIC observes, the events the subject of this aspect of the claim against Mr Bettles arose after commencement of this proceeding in relation to the Bradford Marine liquidation.  Despite that ASIC submits that this conduct may be taken into account cumulatively with the other conduct alleged in the proceeding under subs 45(1) and subs (4) of the IPS.

19. There are two aspects to the claim against Mr Bettles arising out of the Bradford Marine liquidation. 

20. The first arises out of the proposed assignment by the liquidators of the Chose in Action to Mr Clark, the director of Bradford Marine.  The Chose in Action was a claim for the alleged uncommercial sale of the Bradford Marine Business.  The putative defendant to that claim was Mr Clark. 

21. The facts relating to the process undertaken by Mr Bettles in relation to the sale of the Chose in Action and ultimately the assignment to Mr Clark are set out at [763]-[838] above.

22. ASIC contends that in selling the Chose in Action to Mr Clark, Mr Bettles breached:

    (1)Liquidator’s Duty No. 1 being to identify, take possession of and realise the company’s assets, to investigate and determine the claims against the company and to apply the assets to the satisfaction of those claims in accordance with the statutory duty of priority because he agreed to sell the Chose in Action without undertaking investigations and without obtaining legal advice as to whether it was of value; and/or

    (2)Liquidator’s Duty No. 1, Liquidator’s Duty No. 2 and Liquidator’s Duty No. 5 by failing to act independently when accepting the offer from Mr Clark for the purchase of the Chose in Action and by favouring the interests of having his own fees paid rather than placing the interests of the creditors first.

23. In relation to these alleged breaches of duty ASIC notes that Mr Bettles’ evidence is that he conditionally accepted that offer because it was more beneficial to Bradford Marine’s creditors.  ASIC submits that is not so because, regardless of which offer was accepted, all realisations from the sale of the Chose in Action would be consumed by the liquidation remuneration.  ASIC observes that Mr Bettles also stated that if Helicopter Aerial Surveys had been assigned the Chose in Action it would be only to the benefit of Helicopter Aerial Surveys rather than creditors as a whole.  ASIC submits that while Helicopter Aerial Surveys may have benefited (noting it was by far the largest creditor) there was no benefit to creditors with either offer.  ASIC contends that the only beneficiary of the offer from Mr Clark was Mr Bettles’ remuneration as liquidator and thus the inference arises that Mr Bettles was motivated by his own interests in having his remuneration paid when proposing to accept the offer from Mr Clark.

24. I turn first to the alleged breach of Liquidator’s Duty No. 1 arising out of the sale of the Chose in Action.  That duty as articulated by ASIC has a number of aspects to it.  Mr Bettles submits that ASIC’s claim is legally misconceived because Liquidator’s Duty No. 1 does not exist. 

25. ASIC relies on Australian Securities and Investments Commission v Edge (2007) 211 FLR 137; [2007] VSC 170 at [40] in support of its articulation of Liquidator’s Duty No 1. In that case at [40] Dodds-Streeton J said:

    The liquidator’s essential functions are to identify, take possession of and realise the company’s assets, to investigate and determine the claims against the company and to apply the assets to the satisfaction of those claims in accordance with the statutory scheme of priority.

    There Dodds-Streeton J was, to adopt her Honour’s description, summarising the functions of a liquidator.  Her Honour was not setting out the duties of a liquidator.  I accept Mr Bettles’ submission that Liquidator’s Duty No. 1 as expressed by ASIC is not in fact a duty that is owed by liquidators.  

26. But even assuming there was such a duty, ASIC has not established that Mr Bettles breached it. This is for two reasons. First, Mr Bettles identified the asset, i.e. the Chose in Action, took possession of it and was intending to realise it by effecting the assignment. Secondly, ASIC does not identify what investigations Mr Bettles should have undertaken in relation to the Chose in Action or more generally but, in any event, he did undertake investigations as summarised at [781]-[782] above. This included investigations into the sale of the Bradford Marine Business. As for legal advice, the sale to Mr Clark was conditional on Mr Bettles first obtaining legal advice and Mr Clark paying a non-refundable deposit to enable Mr Bettles to obtain that advice.

27. That leaves the alleged breach of Liquidator’s Duty No. 1, Liquidator’s Duty No. 2 and Liquidator’s Duty No. 5 which ASIC alleges were breached by Mr Bettles’ failure to act independently in accepting the offer from Mr Clark and by favouring the interests of having his own fees paid rather than placing the interests of creditors first. 

28. Mr Bettles again submits that the claim is legally misconceived because it assumes duties which do not exist. 

29. In relation to Liquidator’s Duty No. 1 my comments at [854]-[855] above apply equally here.

30. Liquidator’s Duty No. 2 is expressed as follows:

    Liquidators are required to become thoroughly acquainted with the affairs of the company and must not suppress and conceal anything that arises in the course of the investigation into the company …

31. In support of this duty ASIC relies on Re Contract Corporation (Gooch’s Case) (1871) LR 7 Ch App 207 at 211. There the Court said in relation to the role of an official liquidator that:

    It is his duty to the whole body of shareholders, and to the whole body of creditors, and to the Court, to make himself thoroughly acquainted with the affairs of the company; and to suppress nothing, and to conceal nothing, which has come to his knowledge in the course of his investigation, which is material to ascertain the exact truth in every case before the Court.

32. As set out above, the functions of a liquidator include investigating the company’s affairs but the extent of those investigations will depend on the nature of the company and the resources available to the liquidator to carry out those investigations.  

33. Liquidator’s Duty No. 5 is that liquidators are obligated to perform their duties in accordance with high standards of honesty, impartiality and probity.  In support of that proposition ASIC relies on Edge at [44] and Re Owston Nominees No 2 Pty Ltd (in liq) (rec and mgrs apptd) (2013) 94 ACSR 500; [2013] NSWSC 538 at [24]. In Edge at [44] Dodds-Streeton J said:

    The extensive powers vested exclusively in the liquidator entail a corresponding vulnerability in the creditors, members and the public. The liquidator is a fiduciary on whom high standards of honesty, impartiality and probity are imposed both by the Act and the general law. As an officer of the company, the liquidator has a statutory duty of care, diligence and good faith.

1. So much may be accepted.  Insofar as a liquidator is a fiduciary, he or she is required to act bona fide in the best interests of the company and impartially between competing stakeholders. 

2. Accepting that the duties as framed by ASIC exist, I turn to consider whether Mr Bettles has breached those duties in the manner alleged.

3. Liquidator’s Duty No. 1 and Liquidator’s Duty No. 2 are duties to identify and gather in assets and to investigate.  The alleged breach here is a failure to act independently in accepting Mr Clark’s offer and by Mr Bettles putting his own interests above those of the creditors.  I cannot see how any aspect of that alleged conduct could amount to a breach of Liquidator’s Duty No. 1 or Liquidator’s Duty No. 2 as articulated by ASIC. 

4. That leaves Liquidator’s Duty No. 5. 

5. Relevantly Messrs Bettles and Robba advised creditors that there were insufficient funds to further investigate the sale of the Bradford Marine Business or to pursue recovery action.  They had invited creditors to contribute to those costs but no creditor took up that invitation (see [777] and[800] above).  That being so, the liquidators were not in a position to investigate further and pursue recovery action in relation to the sale of the Bradford Marine Business.

6. An available alternative was to assign the right to pursue a recovery action.  The liquidators received two offers to acquire the Chose in Action: one from Helicopter Aerial Surveys and one from Mr Clark.  Mr Bettles believed that Mr Clark’s proposal was preferable because:

   (1)it was for a significantly higher amount compared to Helicopter Aerial Surveys’ proposal; and

   (2)the Helicopter Aerial Surveys proposal did not provide any return to the liquidation of any proceeds of the proceeding or for Helicopter Aerial Surveys’ provable claim in the liquidation to be reduced by any proceeds from the proceedings,

   (see [828] and [830] above).

7. In those circumstances, and given that Mr Clark’s proposal was made by a potential defendant to any proceedings concerning the sale of the Bradford Marine Business, it was appropriate that legal advice and, if so advised, directions from the Court, be obtained before making a final decision.  Despite Mr Bettles’ request, the Helicopter Aerial Services proposal did not provide for any funds to be paid for the liquidators to seek legal advice in advance of the execution of the proposed assignment with it.  By contrast, Mr Clark’s proposal did.

8. Mr Bettles’ belief that Mr Clark’s proposal was better than that received from Helicopter Aerial Services was genuinely held and, in the circumstances, reasonable.  There is no evidence that Mr Bettles did not act independently in accepting it on the conditional basis that he did.  Nor is there any evidence to support the contention that Mr Bettles acted in his own interests by preferring payment of his own fees over the interests of creditors.  Mr Bettles explained that the fact that the $25,000 offered by Mr Clark would have been consumed by the liquidators’ remuneration and costs was merely a consequence, not the purpose, of conditionally accepting Mr Clark’s proposal.  The same consequence would have resulted from acceptance of the proposal from Helicopter Aerial Surveys (see [831] above).  There is no reason not to accept Mr Bettles’ evidence in this regard, it is inherently plausible.  Further, that Mr Clark’s offer would, given its quantum, cover more of the liquidators’ remuneration does not lead me to infer that Mr Bettles preferred his own interest over that of the creditors.   

9. The second aspect of the claim arises out of Mr Bettles’ failure to consent to Helicopter Aerial Surveys’ application to remove him as liquidator. The relevant facts are set out at [842]-[847] above.

10. In relation to this aspect of its claim ASIC contends that Mr Bettles breached:

    (1)Liquidator’s Duty No. 4, Liquidator’s Duty No. 5 and Liquidator’s Duty No. 6, to exercise a particular professional skill and a high standard of care and diligence, to perform his duties with high standards of honesty, impartiality and probity, and to be seen to be independent of the company, by failing to agree that he should be removed as liquidator in the circumstances evidenced in the originating application and/or failing to resign as liquidator; and

    (2)Liquidator’s Duty No. 7, to complete the administration within a reasonable time and not to protract the liquidation unduly, by failing to consent to his removal as liquidator in the circumstances evidenced in the originating application. 

11. ASIC submits that Mr Bettles’ evidence is that he now knows the application to remove him as liquidator was opposed by his lawyers and that this was contrary to his instructions.  ASIC contends that Mr Bettles provides no adequate explanation as to how the defence of the application was carried out contrary to his instructions and that, in any event, the effect of that opposition was to prolong the conduct of the liquidation. 

12. Liquidator’s Duty No. 5 is set out above.  Liquidator’s Duty No.  4, Liquidator’s Duty No. 6 and Liquidator’s Duty No. 7 are set out in Annexure A to these reasons.  In summary, they concern the need for liquidators to exercise a particular professional skill and a high standard of care and diligence in the performance of their duties, the need for independence and the need to complete the administration of assets within a reasonable time and not to protract the liquidation. 

13. Central to ASIC’s claims that Mr Bettles failed to discharge his obligations in relation to this aspect of the Bradford Marine liquidation is the contention that Mr Bettles opposed the application to have him removed. 

14. Mr Bettles submits that this contention is not made out and must fail because he instructed his solicitors not to oppose the application. 

15. As set out at [843] above, Mr Bettles had a telephone conversation with his solicitors on 23 August 2021 during which, as recorded in his contemporaneous file note, he instructed his solicitor to appear on the application for removal of the liquidators and to “set out all that had happened, note that we didn’t understand what we had done wrong to require replacement but in any event would abide by the orders of the court”. Further, as set out at [844] above, on 24 August 2021 Mr Bettles had a telephone conversation with Mr Clark’s solicitor, Mr Grant, in which, again as recorded in his contemporaneous file note, Mr Bettles informed Mr Grant that they would “explain to the court what had happened … and that whilst we aren’t fighting the application we don’t understand what we have done wrong to deserve being removed”.

16. Notwithstanding the instructions Mr Bettles gave to his solicitor the removal application was opposed by the solicitor. Mr Bettles accepted in cross-examination that it was unusual for a lawyer to appear on an application and oppose it when he had given instructions to the contrary. However, it was not put to Mr Bettles that his evidence of his conversations recorded at [843]-[844] above and the contemporaneous file notes of those conversations were false. That being so I would accept Mr Bettles’ evidence that he gave instructions to his solicitor to explain the position to the Court and to indicate that the liquidators would abide by the orders of the Court. It is implicit in those instructions that the liquidators did not intend to oppose the application for their removal.

17. The allegations of breach of duty are not made out. 

18. In any event, there would have been nothing improper in opposing the application for removal given the circumstances described at [828]-[830] above. Accordingly, there could be no breach of any of the duties alleged arising out of a decision to oppose the application. Nor is there any evidence that, by failing to consent to the removal of the liquidators, Mr Bettles protracted the liquidation. The evidence is that the originating application was filed on 16 August 2021 and was determined on 25 August 2021. That is, it was dealt with in a period of just over one week.

19. For those reasons ASIC has not established that Mr Bettles breached any of the specified Liquidator’s Duties in relation to the conduct complained of and it follows that there are no matters arising out of his alleged conduct in relation to the Bradford Marine liquidation that may be taken into account under s 45-1 of the IPS.

    8.               Relief sought by ASIC

20. ASIC submits that the Court can take into account the cumulative nature and effect of Mr Bettles’ conduct under s 45-1(4) of the IPS and can also take into account each individual item of Mr Bettles’ conduct, or any one or more item of the same taken in combination, for the purposes of s 45-1(4) the IPS.

21. ASIC has only established one of its many claims against Mr Bettles. That is Mr Bettles’ failure to provide adequate disclosure in the DIRRIs in relation to the MacVicar Advice contrary to cl 6.10.3 of the ARITA Code. That failure was limited to two aspects of the DIRRIs: the frequency of contact with Mr MacVicar; and the period over which the work was performed. While there was non-compliance with a clause of the ARITA Code, a matter which I may take into account for the purposes of s 45-1(4) of the IPS, I am not satisfied that such conduct is to be taken into account having regard to the non-exhaustive matters that can be taken into account for the purposes of that subsection. While I accept that there should be full disclosure in a DIRRI, including meeting the requirements of cl 6.10.3 of the ARITA Code, the infractions here were, in the circumstances, minor, even taking into account that they were repeated in more than one DIRRI.

22. It follows that I am not satisfied that there are any matters to be taken into account for the purposes of s 45-1 of the IPS. Therefore there will be no requirement for the matter to proceed to a hearing for remedies and sanctions.

    9.               Conclusion

23. Given my findings, the proceeding should be dismissed with costs.

24. If either party wishes to make any application in relation to the costs of the proceeding, they should do so by filing submissions, not exceeding five pages in length, within 14 days.  If submissions are filed then the other party has leave to file any submissions in reply, not exceeding five pages in length, within 14 days thereafter.  Unless the parties request an oral hearing, any application made in relation to costs of the proceeding will be determined on the papers.

25. I will make orders accordingly.

I certify that the preceding eight hundred and eighty-eight (888) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Markovic.

Associate:

Dated:       18 August 2023

ANNEXURE A

SCHEDULE C to the FURTHER AMENDED STATEMENT OF CLAIM

Liquidators’ Duties

1.Liquidators are required to identify, take possession of and realise the company’s assets, to investigate and determine the claims against the company and to apply the assets to the satisfaction of those claims in accordance with the statutory scheme of priority: ASIC v Edge (2007) 211 FLR 137 at [40].

2.Liquidators are required to become thoroughly acquainted with the affairs of the company and must not suppress and conceal anything that arises in the course of the investigation into the company: Re Contract Corporation (Gooch’s Case) (1871) LR 7 Ch App 207 at 211.

3.Liquidators are subject to the same statutory duties as directors: ASIC v Dunner (2013) 303 ALR 98; [2013] FCA 872 at [28].

4.Liquidators are appointed and paid to exercise a particular professional skill and a high standard of care and diligence is required in the performance of their duties: Pace v Antlers Pty Ltd (in liq) (1998) 80 FCR 485 at 497, 499.

5.Liquidators are obligated to perform their duties in accordance with high standards of honesty, impartiality and probity: ASIC v Edge (2007) 211 FLR 137 at [44]; Re Owston Nominees No 2 Pty Ltd (in liq) (rec and mgrs apptd) (2013) 94 ACSR 500; [2013] NSWSC 538 at [24].

6.Liquidators must not only be independent of the company but must also be seen to be independent of the company: Re National Safety Council of Australia, Victorian Div [1990] VR 29; (1989) 15 ACLR 602; Bovic Lend Lease Pty Ltd v Wily (2003) 45 ACSR 612; 21 ACLC 1737; [2003] NSWSC 467 at [123].

7.Liquidators are under a duty to complete the administration of the assets within a reasonable time and not to protract the liquidation unduly: Re House Property & Investment Co [1954] Ch 576 at 612.

8.Liquidators are required to pay close attention to their obligations under the Code of Practice for Insolvency Practitioners: Re Monarch Gold Mining Co Ltd; Ex parte Hughes (2008) WASC 201 at [37]-[40].